Labopharm reports results for second quarter fiscal 2004

Jul 28, 2004, 01:00 ET from Labopharm Inc.

    LAVAL, QC, July 28 /PRNewswire-FirstCall/ - Labopharm Inc. (TSX: DDS)
 today reported its results for the second quarter of fiscal 2004 ended
 June 30, 2004.
     Net loss for the second quarter of fiscal 2004 was $7.1 million, or
 $0.18 per share, compared with $8.8 million, or $0.28 per share, for the
 second quarter of fiscal 2003. The decrease in net loss is attributable to
 lower expenses resulting from completion of the U.S. Phase III clinical trials
 for the Company's once-daily tramadol product, which was partially offset by
 the total stock-based compensation expense of $684,000 for the current quarter
 and an increase in depreciation, amortization, interest expense and costs
 associated with financing the Company.
     Once-Daily Tramadol Commercialization Programs
     In Labopharm's program to commercialize its once-daily formulation of
 tramadol in Europe, the Company is continuing discussions with regulatory
 authorities in France (the Agence Francaise de Securite Sanitaire des Produits
 de Sante) following the favourable review of the clinical component of the
 Company's Marketing Authorization Application (MAA), one of two components of
 the MAA, during the first quarter of this year. Labopharm has responded to the
 Agency's questions regarding the chemistry, manufacturing and control (CMC)
 portion of the MAA and, upon favourable review, would expect to receive full
 approval of its Application in due course.
     In its U.S. commercialization program for once-daily tramadol, Labopharm
 continues to advance towards submission of a New Drug Application (NDA) with
 the U.S. Food and Drug Administration (FDA). The Company is continuing
 evaluation of its global clinical trial data in preparation for further
 discussions with the FDA regarding its NDA submission. In addition, the
 Company continues to advance discussions with potential U.S. marketing
 partners for its once-daily tramadol product.
     "In Europe, we continue to move steadily toward anticipated regulatory
 approval of our once-daily tramadol product in France, which will initiate the
 Mutual Recognition Procedure," said James R. Howard-Tripp, President and Chief
 Executive Officer, Labopharm Inc. "Our discussions with the French authorities
 are moving forward and, together with our partners, we now have in place the
 majority of the logistical requirements to support the commercial launch of
 our product. In the U.S., our objective is to determine the most efficient and
 timely manner by which to seek approval for our once-daily tramadol product.
 Our discussions with potential U.S. marketing partners continue to steadily
 progress and we are encouraged by our negotiations."
     Other Development and Commercialization Programs
     Once-Daily Betathistine - The Company has initiated manufacturing of
 clinical trial batches for a pharmacokinetic study, which it expects to
 initiate shortly.
     Once-Daily Oxybutynin - The Company has completed the second of a series
 of pharmacokinetic studies and is awaiting the study results.
     Sustained-Release Gabapentin - The Company is completing formulation work
 prior to initiating an investigational study in humans.
     Once-Daily Trazadone - The Company has completed development of two
 prototypes and is initiating scale-up for clinical trial batch manufacturing.
     Other Highlights for the Quarter
     -  Labopharm entered into an agreement with Debiopharm S.A. under which
        Debiopharm has engaged Labopharm to conduct research on the potential
        oral delivery of a current intravenous cancer drug using Labopharm's
        proprietary polymeric nano-delivery systems technology (also referred
        to as micelles technology). Labopharm is currently initiating research
     -  Labopharm completed a $30 million bought deal financing, the
        proceeds of which will be used to support the anticipated global
        commercialization of the Company's once-daily formulation of tramadol,
        including both launch of the product in Europe and submission of a
        New Drug Application (NDA) in the United States, and to advance
        development of other product candidates in its pipeline, as well as
        for working capital and general corporate purposes.
     Financial Results
     Revenue for the second quarter of fiscal 2004 was $187,000 compared with
 $679,000 for the second quarter of fiscal 2003. Investment income accounted
 for $94,000 of the most recent quarter's total revenue compared with $157,000
 for the same period of fiscal 2003, reflecting lower cash and investment
 balances and a lower return on investments due to a general decrease in market
 interest rates. Revenue from research and development contracts accounted for
 $81,000 compared with $522,000 for the quarter ended June 30, 2003. Research
 and development contract revenue for the second quarter of 2004 was generated
 from the Company's agreement with Gruppo Angelini, under which Labopharm is
 developing a once-daily formulation of the antidepressant trazodone
 hydrochloride. Research and development contract revenue for the second
 quarter of last year was derived entirely from the agreement with MedPointe
 for progress made on the development of DDS-2001. During the second quarter
 of fiscal 2004, Labopharm recognized $12,000 as licensing revenue,
 representing a portion of the up-front payments received from Gruppo Angelini
 and Esteve S.A in conjunction with license and distribution agreements for
 once-daily tramadol. These up-front payments are being recognized on a
 straight-line basis over the term of the respective agreement with each
 company. For the six-month period ended June 30, 2004, revenue was $386,000
 compared with $985,000 for the corresponding period last year. Investment
 income accounted for $200,000 of total revenue for the first half of the year,
 while research and development contracts accounted for $162,000 and licensing
 revenues accounted for $24,000.
     Research and development expenses (net of tax credits) for the second
 quarter of fiscal 2004 were $2.1 million compared with $7.1 million for
 the second quarter of fiscal 2003. The decrease was primarily the result of
 lower costs related to the clinical trial program for once-daily tramadol
 in the most recent quarter. The decrease was partially offset by increased
 fixed costs related to the Company's research and development group and
 infrastructure, and an amount of $164,000 as a result of the new requirement
 to expense all stock-based compensation, which the Company adopted as of
 January 1, 2004. For the six-month period, research and development expenses
 (net of tax credits) were $7.1 million compared with $13.3 for the
 corresponding period last year. The decrease is primarily the result of lower
 costs related to the clinical trial program for once-daily tramadol.
     Selling, general and administrative expenses for the second quarter of
 fiscal 2004 were $4.5 million compared with $1.8 million for the second
 quarter of fiscal 2003. The increase was due primarily to non-recurring costs
 related to a potential financing that did not occur, as well as stock-based
 compensation expense of $520,000. For the six-month period, selling, general
 and administrative expenses were $6.6 million compared with $3.6 million for
 the first half of last year.
     Cash and investments (including accrued interest) as at June 30, 2004
 were $33.5 million compared with $20.9 million as at December 31, 2003. The
 increase was primarily the result of the $30 million bought deal financing
 completed in May 2004.
     "Having concluded the Phase III clinical trials for once-daily tramadol,
 our cash burn was significantly lower in the second quarter after removing
 non-recurring costs," said Mr. Howard-Tripp. "Our usage of cash will continue
 to fluctuate with clinical trial activity as we advance the development
 programs in our pipeline."
     Conference Call
     Labopharm will host a conference call today (Wednesday, July 28, 2004 at
 8:30 a.m. ET) to discuss its second quarter fiscal 2004 results. To access the
 conference call by telephone, dial 416-405-9328 or 1-800-387-6216. Please
 connect approximately five minutes prior to the beginning of the call to
 ensure participation. The conference call will be archived for replay until
 Wednesday, August 4, 2004 at midnight. To access the archived conference call,
 dial 416-695-5800 or 1-800-408-3053 and enter the reservation number 3080881.
 A live audio webcast of the conference call will be available at and 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 sites for 90 days.
     About Labopharm Inc.
     Labopharm Inc. (TSX:DDS) is an international specialty pharmaceutical
 company focused on the development of drugs incorporating the Company's
 proprietary advanced controlled-release technology, Contramid(R). Contramid(R)
 can be applied to a wide variety of drugs in solid oral dosage form, improving
 their oral administration and performance and is used to develop products that
 are either bio-equivalent to existing, branded products, or are new branded
 products. The Company's pipeline includes a combination of both in-house and
 partnered programs with products both in clinical trials and in preclinical
 development. Labopharm is also developing implantable mini-tablets based on
 Contramid(R) for local administration of drugs and novel nano-delivery systems
 for both systemic and targeted delivery of water-insoluble drugs. For more
 information, please visit
     This press release contains forward-looking statements, which reflect the
     Corporation'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 successful and timely completion of clinical
     studies, the uncertainties related to the regulatory process and the
     commercialization of the drug thereafter. Investors should consult the
     Corporation'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 Corporation disclaims any obligation to update these
     forward-looking statements.
                                                           As at        As at
                                                         June 30,     Dec. 31,
                                                            2004         2003
     (Thousands of dollars)                                    $            $
       Cash and cash equivalents                             646          720
       Short-term investment                              27,436       18,727
       Accounts receivable                                   554        1,295
       Research and development tax credits receivable     1,317          900
       Prepaids and other assets                             556          337
                                                          30,509       21,979
     Long-term investments                                 5,325        1,281
     Property, plant and equipment                        11,341       11,468
     Intangible assets                                     1,944        1,991
                                                          49,119       36,719
       Accounts payable and accrued liabilities            4,130        7,087
       Current portion of deferred revenue                   433           46
       Current portion of obligations under capital leases   177          169
                                                           4,740        7,302
     Deferred revenue                                        422          431
     Obligations under capital leases                      5,967        6,046
                                                          11,129       13,779
     Capital stock (note 5)                              132,647      104,035
     Contributed surplus                                   4,067            -
     Deficit                                             (98,724)     (81,095)
                                                          37,990       22,940
                                                          49,119       36,719
     For periods of :           Three months ended         Six months ended
     (Thousands of dollars,    June 30,     June 30,     June 30,     June 30,
      except share and per        2004         2003         2004         2003
      share amounts)                 $            $            $            $
      and development               81          522          162          600
     Licensing                      12            -           24            -
     Investment income              94          157          200          385
                                   187          679          386          985
     Research and development
      expenses, net              2,118        7,137        7,092       13,298
     Selling, general and
      administrative expenses    4,476        1,839        6,617        3,636
      and amortization             438          378          836          504
     Foreign exchange loss           9           12           39           37
     Interest expense              212          136          424          146
                                 7,253        9,502       15,008       17,621
     LOSS BEFORE INCOME TAXES   (7,066)      (8,823)     (14,622)     (16,636)
     Income taxes :
       Current                      18            4           31            8
     NET LOSS FOR THE PERIOD    (7,084)      (8,827)     (14,653)     (16,644)
      - BASIC AND DILUTED        (0.18)       (0.28)       (0.39)       (0.54)
     Weighted average
      number of common
      shares outstanding    38,767,796   31,086,753   37,403,553   31,073,723
     For periods of :           Three months ended         Six months ended
                               June 30,     June 30,     June 30,     June 30,
                                  2004         2003         2004         2003
     (Thousands of dollars)          $            $            $            $
     Net loss for the period    (7,084)      (8,827)     (14,653)     (16,644)
     Items not affecting cash
       Depreciation of property,
        plant and equipment        373          286          738          387
       Amortization of
        intangible assets           65           92           98          117
       Stock-based compensation    684            -        1,095            -
                                (5,962)      (8,449)     (12,722)     (16,140)
     Net change in non-cash
      operating items             (580)       1 917       (2,474)       3,369
                                (6,542)      (6,532)     (15,196)     (12,771)
      of investments           (31,480)        (150)     (31,931)      (2,772)
     Disposals of investments      971        8,615        3,121       14,625
     Maturities of investments   7,909           60       16,057        3,616
     Acquisition of property,
      plant and equipment         (276)      (1,626)        (598)      (2,918)
     Acquisition of
      intangible assets             (1)         (63)         (51)         (90)
                               (22,877)       6,836      (13,402)      12,461
     Repayment of capital
      lease obligations            (43)         (25)         (84)         (27)
     Proceeds from issuance
      of capital stock          30,081          203       30,773          217
     Issuance costs of
      capital stock             (2,165)           -       (2,165)           -
                                27,873          178       28,524          190
      CASH AND
      CASH EQUIVALENTS          (1,546)         482          (74)        (120)
     Cash and cash equivalents,
      beginning of period        2,192        1,116          720        1,718
      END OF PERIOD                646        1,598          646        1,598

SOURCE Labopharm Inc.