Labopharm Reports Results for First Quarter Fiscal 2008

- Once-Daily Tramadol Continues to Gain Market Share in Europe and Canada; Company Preparing NDA for Trazodone Contramid(R) Once-a-Day - LAVAL, QC, May 8 /PRNewswire-FirstCall/ - Labopharm Inc. (TSX: DDS;NASDAQ: DDSS) today reported its results for the first quarter ended March31, 2008. All figures are in Canadian dollars unless otherwise stated. "While we continue to make strong progress in the globalcommercialization of our once-daily tramadol product, we are preparing theNew Drug Application for our second product, trazodone Contramid(R)once-a-day, for submission prior to year-end, and have initiated the PhaseIII clinical study for our third product, a twice-daily formulation oftramadol and acetaminophen," said James R. Howard-Tripp, President andChief Executive Officer, Labopharm Inc. "In our global commercializationprogram for once-daily tramadol, our product has been launched in 10countries, including Poland earlier this year, and is steadily gainingmarket(1) share in Europe(2) and Canada. In February, the latest month forwhich data is available, our product was the best selling once-dailytramadol product in four of the five largest European markets." Mr. Howard-Tripp added, "We are encouraged by the positive Phase IIIresults for trazodone Contramid(R) once-a-day. One of the greatestchallenges in treating depression is that up to 50% of patients discontinuetheir medication within six months of initiating treatment and, thereforewould benefit from an alternative treatment option. Patients need rapidimprovement of their depressive symptoms and may experience insomnia andagitation. Our study demonstrated that trazodone Contramid(R) once-a-daywas statistically superior to placebo by the end of the first week oftreatment and was associated with an improvement in overall sleep quality.Accordingly, we are optimistic about the prospects for our formulation inthe market for antidepressants." Financial Summary Revenue from product sales of Labopharm's once-daily tramadol for thefirst quarter of fiscal 2008 was $2.2 million compared with $3.4 millionfor the first quarter of fiscal 2007, with the difference primarily due tothe fact that a large majority of revenue for the first quarter of fiscal2007 consisted of initial launch quantities to new markets. End-user marketsales are growing across essentially all markets. Gross margin for thefirst quarter of fiscal 2008 increased to 56% from 50% for the firstquarter of fiscal 2007. Research and development and selling, general andadministrative expenses for the first quarter of fiscal 2008 were $10.5million compared with $9.6 million for the first quarter of fiscal 2007.Net loss for the first quarter of fiscal 2008 was $9.7 million, or $0.17per share, compared with $6.5 million, or $0.11 per share, for the firstquarter of fiscal 2007. Recent Developments Once-Daily Tramadol Global Commercialization Program Product Continues to Gain Market Share - Labopharm's product continuesto steadily gain market share in those countries in which it has beenlaunched. In February 2008, overall share of the European(2) tramadolmarket(1) had grown significantly from December 2007 and penetration of theonce-daily segment of the European(2) tramadol market(1) exceeded 41%.Growth in the broader tramadol market(1) was particularly strong in Franceand Spain, where market share in February 2008 reached 6.8% and 17.4%,respectively. In Canada, the product's share of the tramadol product marketincreased to 15% in March 2008. Product Launched in Poland - Labopharm's product was launched in Polandby its marketing partner for that country. Appealed FDA's Decision to Next Supervisory Level After AdditionalAnalysis Supported Efficacy - Labopharm continued the Formal DisputeResolution process, appealing the U.S. Food and Drug Administration's (FDA)decision on its once-daily tramadol formulation to the next supervisorylevel. Labopharm's continuation of the appeal process followed thecompletion of additional statistical analysis of existing data per theAgency's suggestion as a means to potentially satisfy its requirements forregulatory approval. The Company believes that the additional analysisconfirms the conclusions of efficacy of its once-daily tramadol formulationas demonstrated in previous analyses that were included in its New DrugApplication (NDA) and additional submissions thereafter. Trazodone Contramid(R) Once-a-Day for Treatment of Depression Reported Positive Results for Phase III Trial - Labopharm reportedpositive results for its Phase III clinical trial for once-daily trazodone(study 04ACL3-001). In addition to achieving statistical significance forthe primary endpoint (p value of 0.0183) for efficacy in the treatment ofdepression, the study shows an improvement of the overall quality of sleep.Moreover, the study demonstrated that once-daily trazodone wasstatistically superior to placebo by the end of the first week oftreatment. The Company plans to file a New Drug Application (NDA) for itsonce-daily formulation with the FDA later this year. Twice-Daily Tramadol-Acetaminophen Combination Product Initiated Phase III Clinical Trial - Labopharm began enrolling patientsin its North American Phase III clinical trial for its twice-daily,tramadol-acetaminophen combination product (study 06CCL3-001). The Companyexpects data to be available later this year. Misuse Prevention Platform Completed Preclinical Studies on Proof of Principle - Labopharmcompleted pre-clinical, proof-of-principle studies using once-dailytramadol as a safe representative of the controlled-release opioid class ofdrugs. The positive results of the pharmacokinetic and in vitro studiesdemonstrated controlled-release and misuse prevention characteristics,respectively. ---------------------------------- (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. Financial Results Revenue for the first quarter of fiscal 2008 was $3.2 million comparedwith $5.4 million for the first quarter of fiscal 2007. Revenue fromproduct sales was $2.2 million compared with $3.4 million. The differenceis mainly attributable to the fact that a large majority of product salesfor the first quarter of fiscal 2007 consisted of initial launch quantitiesfor new European markets. End-user market sales were growing acrossessentially all of the Company's markets. Gross margin (as a percentage of revenue from product sales) for thefirst quarter of fiscal 2008 increased to 56% from 50% for the firstquarter of fiscal 2007. The increase in gross margin was due primarily tolower packaging costs, which were partially offset by lower average sellingprices per tablet. The reduction in our packaging costs is the result ofrecent price negotiations with our vendor, and reflects our continuedefforts to reduce our cost of goods sold to improve our gross margin. Licensing revenue for the first quarter of fiscal 2008 was $1.1 millionand represented a portion of licensing payments received from the Company'slicensing and distribution partners for once-daily tramadol. Licensingrevenue for the first quarter of fiscal 2007 was $2.0 million. The decreasein licensing revenue was primarily the result of the extension of theestimated term over which the Company is recognizing the up-front paymentof US$20 million previously received from Purdue Pharma following receiptof the second Approvable Letter from the FDA in May 2007. Research and development expenses, net of research and development taxcredits for the first quarter of fiscal 2008 were $5.7 million comparedwith $4.5 million for the first quarter of fiscal 2007. The increase wasprimarily the result of a higher level of clinical trial activity and thegeneral increase in the Company's research and development activities inthe first quarter of fiscal 2008. Research and development tax credits forthe first quarter of fiscal 2008 were $1.2 million compared with $0.8million for the first quarter of fiscal 2007. Selling, general and administrative expenses for the first quarter offiscal 2008 decreased to $4.8 million from $5.2 million for the firstquarter of fiscal 2007. The decrease is primarily due to lower non-cashstock-based compensation expense. During the first quarter, the Company made an additional adjustment tothe estimated fair value of its asset backed commercial paper (ABCP)investment and took an additional impairment charge of $0.7 million. Thetotal impairment charge taken to date on the ABCP is $2.2 million. Theinitial ABCP investment was $5.6 million. Net loss for the first quarter of fiscal 2008 was $9.7 million, or$0.17 per share, compared with $6.5 million, or $0.11 per share, for thefirst quarter of fiscal 2007. Cash, cash equivalents and available-for-sale marketable securities atMarch 31, 2008 were $64.4 million, compared with $71.9 million at December31, 2007. The cash, cash equivalents and available-for-sale marketablesecurities position at March 31, 2008 does not include the Company's ABCPhaving an estimated fair value of $3.7 million that was reclassified as along term investment in the third quarter of 2007. Labopharm's cash, cashequivalents and available-for-sale marketable securities at March 31, 2008decreased by $7.5 million compared to December 31, 2007, primarily due tothe use of funds for operating activities. Labopharm continues to expect global sales of its once-daily tramadolproduct to be variable from quarter to quarter as a result of pipeline filland other supply chain and market dynamics associated with the early stagesof product launches. Labopharm believes that the penetration of markets inwhich its product has already been launched, as well as additional productlaunches globally, will result in continued annual growth in product sales. Conference Call Labopharm will host a conference call today (Thursday, May 8, 2008 at8:30 a.m. ET) to discuss its first quarter fiscal 2008 results. To accessthe conference call by telephone, dial 416-644-3428 or 1-800-731-5774.Please connect approximately five minutes prior to the beginning of thecall to ensure participation. The conference call will be archived forreplay until Thursday, May 15, 2008 at midnight. This press release contains forward-looking statements, which reflectthe Company's current expectations regarding future events. Theforward-looking statements involve risks and uncertainties. Actual eventscould differ materially from those projected herein and depend on a numberof factors, including the uncertainties related to the regulatory processin various countries for the approval of the Company's products and thesuccessful commercialization of the products throughout the world if theyare approved. Investors should consult the Company's ongoing quarterlyfilings and annual reports for additional information on risks anduncertainties relating to these forward-looking statements. The reader iscautioned not to rely on these forward-looking statements. The Companydisclaims any obligation to update these forward-looking statements.