Labopharm reports results for year end and fourth quarter fiscal 2007



    Once-Daily Tramadol Steadily Gaining Market Share in Europe and Canada,
    Once-Daily Trazodone Phase III Study Demonstrates Positive Results

    LAVAL, QC, Feb. 21 /CNW/ - Labopharm Inc. (TSX: DDS; NASDAQ:   DDSS) today
reported its results for the fiscal year and fourth quarter ended December 31,
2007. All figures are in Canadian dollars unless otherwise stated.
    Revenue from product sales of Labopharm's once-daily tramadol to its
partners for fiscal 2007 increased to $11.9 million from $6.9 million for
fiscal 2006, the result of additional launches and increased market share in
certain countries. Revenue from product sales of once-daily tramadol for the
fourth quarter of fiscal 2007 was $1.6 million compared with $2.8 million for
the fourth quarter of fiscal 2006. The difference is mainly attributable to
significant shipments of initial launch quantities in the fourth quarter of
2006, which continued well into the first quarter of 2007, and included
inventory stocking throughout the supply chain. As a result, while end-user
market sales were growing across all markets during the fourth quarter of
2007, sales to our distribution partners were lower than in the fourth quarter
of 2006.
    "We are continuing to steadily advance the global commercialization
program for our once-daily tramadol product, capturing an increasing share of
those markets in which it has been launched, and in 2008 we expect to launch
our product in an additional 10 to 20 countries," said James R. Howard-Tripp,
President and Chief Executive Officer, Labopharm Inc. "We finished fiscal 2007
with the successful launch of our once-daily tramadol product in Canada, in
addition to strengthening our balance sheet to support the development and
commercialization of the significant opportunities in our robust pipeline."
    Mr. Howard-Tripp continued, "Recently, we announced positive results for
our Phase III study for once-daily trazodone, and have begun preparing our New
Drug Application to support regulatory submissions in both the U.S. and Canada
later this year, in addition to preparing for eventual product
commercialization. With a goal to commercialize multiple drug products, we are
advancing additional opportunities in our pipeline, including our twice-daily
formulation of our tramadol-acetaminophen combination product, for which we
will initiate a Phase III clinical trial in the coming weeks. We are also
continuing to advance our misuse prevention platform for the development of
novel formulations of high potency drugs with significantly reduced potential
for unintentional misuse or abuse."

    Recent Developments

    Once-Daily Tramadol Global Commercialization Program

    Product Steadily Gaining Market Share - Labopharm's product continues to
steadily gain market share in those countries in which it has been launched.
In December 2007, overall share of the European tramadol market had grown
significantly from September 2007 and penetration of the once-daily segment of
the market was nearing 40%(1). Growth in market share(2) was particularly
strong in France, Italy and Spain, where market share(2) in December 2007 was
6.0%, 10.2% and 15.7%, respectively. In Canada, the Company's product captured
almost 9% of the tramadol product market in December 2007, just the third full
month following launch.

    Market and Sales Effort Expanded in Canada - The marketing and sales
effort in Canada was expanded when the Company's licensing and distribution
partner, Paladin Labs Inc., entered into a co-promotion agreement with Nycomed
Canada Inc. The agreement doubled the promotional effort and number of primary
care sales representatives promoting the product in Canada.

    Received Regulatory Approval for South Korea - Labopharm's product
received regulatory approval from the Korea Food and Drug Administration
permitting its marketing and sale in South Korea. The Company expects its
marketing partner to launch its product later this year.

    Completed Marketing Partnership and Received Regulatory Approval for
Australia - Labopharm entered into a licensing and distribution agreement with
iNova Pharmaceuticals (Australia) Pty Limited for Australia and received
regulatory approval from the Australian Department of Health and Aging. The
Company expects its marketing partner to launch its product later this year.
    Completed Marketing Partnership for Turkey - The Company entered into a
licensing and distribution agreement with Dr. F. Frik Ilac San. ve Tic. A.S.
for Turkey.

    Received Response to Appeal from FDA - Labopharm received a written
response from the U.S. Food and Drug Administration (FDA) regarding its most
recent appeal of the decision in the Agency's Approvable Letter. While the FDA
did not overturn the decision, it suggested additional statistical analysis of
existing data, different from that previously requested, as a means to
potentially satisfy the Agency's requirements. The Company is currently
conducting the additional statistical analysis as suggested by the Agency.

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

    Once-Daily Trazodone Development Program

    Reported Positive Results for Phase III Trial - Labopharm reported
positive results for its Phase III clinical trial for once-daily trazodone
(study 04ACL3-001). In addition to achieving statistical significance for the
primary endpoint (p value of 0.0183) for efficacy in the treatment of
depression, the study demonstrated the formulation's ability to significantly
improve the overall quality of sleep. Labopharm plans to file a New Drug
Application (NDA) for its formulation with the FDA later this year.

    Other Development Programs

    Enrolment in Phase III Clinical Trial for Twice-Daily,
Tramadol-Acetaminophen Combination Product to Begin in March - Labopharm has
completed preparations for its Phase III clinical trial for its twice-daily,
combination product of tramadol and acetaminophen, and plans to begin
enrolling patients in the study in March.

    Misuse Prevention Platform - Based upon success to date with the
development of its misuse prevention platform, Labopharm has moved a misuse
prevention formulation of once-daily tramadol into clinical development.

    Financial Results

    Revenue for the fourth quarter of fiscal 2007 was $2.6 million compared
with $5.2 million for the fourth quarter of fiscal 2006. Revenue from product
sales was $1.6 million compared with $2.8 million. The difference is mainly
attributable to significant shipments of initial launch quantities in the
fourth quarter of 2006, which continued well into the first quarter of 2007,
and included inventory stocking throughout the supply chain. As a result,
while end-user market sales were growing across all markets during the fourth
quarter of 2007, sales to our distribution partners were lower than in the
fourth quarter of 2006. Revenue from product sales for the fourth quarter of
fiscal 2007 consisted of follow-on shipments of once-daily tramadol to the
Company's marketing partners in Europe for distribution in various markets.
    Adjusted gross margin (as a percentage of revenue from product sales) for
the fourth quarter of fiscal 2007 decreased to 43.5% (excluding the recovery
and reversal of $390,000 of expenses recorded in 2007, primarily related to
the U.S. pre-launch inventory) from 55.6% (excluding the $1.4 million
inventory write-down related to product that was not manufactured according to
specifications) for the fourth quarter of fiscal 2006. The decrease in
adjusted gross margin compared to the fourth quarter of last year was due
primarily to lower average selling prices per tablet due to a higher
proportion of sales of sample product to partners.
    Licensing revenue for the fourth 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 fourth quarter of fiscal 2006 was $2.3 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, as well as the
non-recurring adjustment of $378,000 in the fourth quarter of 2006 arising
from the removal of refund conditions attached to European up-front payments
received in 2005.
    Research and development expenses before research and development tax
credits for the fourth quarter of fiscal 2007 increased to $7.9 million from
$4.8 million for the fourth quarter of fiscal 2006. The increase was primarily
the result of a higher level of clinical trial activity and the general
increase in the Company's research and development activities in the fourth
quarter of fiscal 2007. Research and development tax credits for the fourth
quarter of fiscal 2007 were $1.6 million compared with $1.3 million for the
corresponding quarter of fiscal 2006.
    Selling, general and administrative expenses for the fourth quarter of
fiscal 2007 decreased to $4.5 million from $5.5 million for the fourth quarter
of fiscal 2006. The decrease is primarily the result of the Company having
incurred certain non-recurring costs, including severance costs, in the fourth
quarter of 2006.
    During the fourth quarter, the Company made an additional adjustment to
the estimated fair value of its asset backed commercial paper (ABCP)
investment and took an additional charge of $0.6 million. The total charge
taken on the ABCP is $1.5 million. The initial ABCP investment was
$5.6 million.
    Net loss for the fourth quarter of fiscal 2007 was $10.0 million, or
$0.18 per share, compared with $7.2 million, or $0.13 per share, for the
fourth quarter of fiscal 2006.
    Cash, cash equivalents and available-for-sale marketable securities at
December 31, 2007 were $71.9 million ($76.2 million including the ABCP that
was classified as a long-term investment in the third quarter of 2007)
compared with $100.8 million at December 31, 2006. Excluding the
reclassification and impairment loss on the ABCP discussed above, Labopharm's
cash, cash equivalents and available-for-sale marketable securities decreased
by $24.5 million compared to December 31, 2006. This decrease was primarily
the result of the use of funds for operating activities, which was partially
offset by a drawdown in December 2007 of US$15 million of a US$25 million debt
facility that the Company completed with Hercules Technology Growth Capital,
Inc. The remaining US$10 million is available to Labopharm beginning May 15,
2008 through November 15, 2008.
    For the fiscal 2007 year, revenue increased to $19.0 million from
$15.9 million for the year ended December 31, 2006. Revenue from product sales
increased to $11.9 million from $6.9 million, primarily attributable to the
fact that, having initiated shipments in several new countries in the fourth
quarter of 2006, we benefited from a full year of sales in these countries in
2007.
    Adjusted gross margin (as a percentage of revenue from product sales) for
fiscal 2007 increased to 49.5% (excluding the $1.4 million write down of U.S.
pre-launch inventory and the favourable adjustment of $236,000 related to the
settlement of a dispute arising from product that was not manufactured
according to specifications in 2006) from 48.7% for fiscal 2006 (excluding the
$1.4 million inventory write-down related to product that was not manufactured
to specifications). The increase in adjusted gross margin for the year ended
December 31, 2007 was due to lower manufacturing costs, which were offset by
lower average selling prices per tablet due to product and country mix, and by
the royalty expense which is effective since January 2007.
    Licensing revenue for fiscal 2007 was $5.8 million, and represented a
portion of licensing payments received from the Company's licensing and
distribution partners for once-daily tramadol. Licensing revenue for fiscal
2006 was $9.0 million. The decrease in licensing revenues 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 before research and development tax
credits for fiscal 2007 were $27.6 million compared with $19.1 million for
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 the Company's other development
programs and the general increase in the Company's research and development
activities. Research and development tax credits for fiscal 2007 were
$4.0 million compared with $3.1 million for fiscal 2006.
    Selling, general and administrative expenses for fiscal 2007 increased to
$20.3 million from $16.6 million for fiscal 2006. The increase is primarily
due to higher headcount and related compensation expense, including
$1.2 million of additional non-cash stock-based compensation expense, and
increased sales, marketing, legal and patent consulting fees.
    Net loss for fiscal 2007 was $36.6 million, or $0.64 per share, compared
with $23.9 million, or $0.46 per share for 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 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 (Thursday, February 21, 2008
at 8:30 a.m. ET) to discuss its year end and fourth quarter fiscal 2007
results. To access the conference call by telephone, dial 416-644-3418 or
1-800-732-0232. Please connect approximately five minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Thursday, February 28, 2008 at midnight. To access
the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter
the reservation number 21260670 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.

    

    CONSOLIDATED STATEMENTS OF OPERATIONS

    For periods of:               Three months ended     Twelve months ended
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
                                    2007        2006        2007        2006
    (Thousands of Canadian
    dollars, except share
    and per share amounts)             $           $           $           $
    -------------------------------------------------------------------------

    REVENUE
    Product sales                  1,576       2,819      11,935       6,863
    Licensing                      1,060       2,339       5,846       9,011
    Research and development
     collaborations                    -           -       1,217           -
    -------------------------------------------------------------------------
                                   2,636       5,158      18,998      15,874
    EXPENSES
    Cost of goods sold
     (excluding amortization)        500       2,673       7,216       4,940
    Research and development
     expenses, net                 6,287       3,588      23,583      16,054
    Selling, general and
     administrative expenses       4,495       5,538      20,335      16,598
    Financial expenses               457         598       1,931       2,654
    Impairment loss on
     long-term investment            600           -       1,474           -
    Depreciation and
     amortization                    492         468       1,974       1,744
    Interest income                 (771)     (1,102)     (3,478)     (3,379)
    Foreign exchange (gain) loss    (243)       (365)         37      (1,008)
    -------------------------------------------------------------------------
                                  11,817      11,398      53,072      37,603
    -------------------------------------------------------------------------
    Loss before income taxes      (9,181)     (6,240)    (34,074)    (21,729)
    Income taxes                     855         925       2,501       2,136
    -------------------------------------------------------------------------
    Net loss for the period      (10,036)     (7,165)    (36,575)    (23,865)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share -
     basic and diluted             (0.18)      (0.13)      (0.64)      (0.46)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of common shares
     outstanding              56,817,963  56,747,963  56,801,196  52,402,798
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS

    For periods of:               Three months ended     Twelve months ended
                                 Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,
                                    2007        2006        2007        2006
    (Thousands of Canadian
    dollars)                           $           $           $           $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net loss for the period      (10,036)     (7,165)    (36,575)    (23,865)
    Items not affecting cash :
      Depreciation of property,
       plant and equipment           425         409       1,729       1,514
      Amortization of
       intangible assets              67          59         245         230
      Amortization of deferred
       financing costs                 -          46           -         208
      Amortization of premium
       and discount on
       marketable securities          48         146         255         146
      Impairment loss on
       long-term investment          600           -       1,474           -
      Non-cash financial expenses     24           -         131           -
      Unrealized foreign exchange
       (gain) loss                  (238)       (374)         44        (921)
      Future income tax               82         (63)         18        (134)
      Stock-based compensation       679         743       4,252       2,600
    -------------------------------------------------------------------------
                                  (8,349)     (6,199)    (28,427)    (20,222)
    Net change in non-cash
     operating items                 133       1,069       1,249     (14,872)
    -------------------------------------------------------------------------
                                  (8,216)     (5,130)    (27,178)    (35,094)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Acquisition of marketable
     securities                   (8,086)     (7,138)    (73,066)   (106,276)
    Proceeds from disposals
     of marketable securities      9,887       2,500      13,385       5,000
    Proceeds from maturities
     of marketable securities      4,085       9,495      85,961      29,994
    Acquisition of property,
     plant and equipment            (252)       (693)     (1,852)     (1,711)
    Acquisition of intangible
     assets                          (36)       (676)       (493)     (1,366)
    -------------------------------------------------------------------------
                                   5,598       3,488      23,935     (74,359)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of obligations
     under capital lease             (25)        (22)        (96)        (83)
    Proceeds from issuance
     of common shares                  -           -         225     114,664
    Issuance costs of
     common shares                     -           -           -      (9,240)
    Repayment of long-term
     debt                         (3,916)       (964)     (6,977)     (3,271)
    Proceeds from issuance
     of long-term debt            14,117           -      14,117           -
    Proceeds from issuance of
     warrants                        541           -         541           -
    Transaction costs                (25)          -         (25)          -
    -------------------------------------------------------------------------
                                  10,692        (986)      7,785     102,070
    -------------------------------------------------------------------------

    Foreign exchange gain
     (loss) on cash held in
     foreign currencies               30         832      (1,091)        823
    -------------------------------------------------------------------------
    Net increase (decrease) in
     cash and cash equivalent
     during the period             8,104      (1,796)      3,451      (6,560)
    Cash and cash equivalents,
     beginning of period           9,069      15,518      13,722      20,282
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                17,173      13,722      17,173      13,722
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information:
    Interest paid                    655         452       1,762       1,994
    Income taxes paid (received)      52         488        (850)        633
    -------------------------------------------------------------------------


    CONSOLIDATED BALANCE SHEETS
                                                          As at        As at
                                                        Dec. 31,     Dec. 31,
                                                           2007         2006
    (Thousands of Canadian dollars)                           $            $
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash and cash equivalents                          17,173       13,722
      Available-for-sale marketable securities           54,726       87,048
      Accounts receivable                                 1,972        2,701
      Research and development tax credits receivable     1,197        1,869
      Income taxes receivable                               161          939
      Inventories                                         2,875        5,287
      Prepaid expenses and other assets                   1,460        1,384
    -------------------------------------------------------------------------
    Total current assets                                 79,564      112,950
    -------------------------------------------------------------------------

    Restricted long-term investments                      1,277        1,280
    Long-term investment                                  4,329            -
    Property, plant and equipment net                    10,800       10,909
    Intangible assets                                     3,453        3,205
    Deferred financing costs                                  -          156
    Future income tax asset                                 116          134
    -------------------------------------------------------------------------
                                                         99,539      128,634
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
      Accounts payable and accrued liabilities            8,719        8,908
      Current portion of deferred revenue                 4,325        7,916
      Current portion of obligations under
        capital leases                                      203           94
      Current portion of long term debt                       -        4,425
    Total current liabilities                            13,247       21,343

    Deferred revenue                                     17,083       16,593
    Obligations under capital leases                      5,613        5,746
    Long term debt                                       13,647        3,396
    -------------------------------------------------------------------------
    Total liabilities                                    49,590       47,078
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock
      Common shares, no par value, unlimited authorized
       shares, 56,817,963 and 56,747,963 issued as at
       December 31, 2007 and 2006 respectively          241,955      241,588
    Warrants                                                541            -
    Contributed surplus                                  12,527        8,417
    Deficit                                            (205,024)    (168,449)
    Accumulated other comprehensive loss                    (50)           -
    -------------------------------------------------------------------------
    Total shareholders' equity                           49,949       81,556
    -------------------------------------------------------------------------
                                                         99,539      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

Organization Profile

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