Labopharm reports results for third quarter fiscal 2004

    LAVAL, QC, Oct. 28 /PRNewswire-FirstCall/ - Labopharm Inc. (TSX: DDS)
 today reported its results for the third quarter of fiscal 2004 ended
 September 30, 2004.
     Net loss for the third quarter of fiscal 2004 was $5.9 million, or $0.14
 per share, compared with $7.9 million, or $0.22 per share, for the third
 quarter of fiscal 2003. The decrease in net loss is attributable to lower
 development costs resulting from completion of the MDT3-002 and MDT3-003
 clinical trials for the Company's once-daily tramadol product, which were
 partially offset by increases in selling, general and administrative expenses
 associated with preparation for launch of once-daily tramadol in Europe and
 the new requirement to expense all stock-based compensation. During the
 quarter, Labopharm announced that it had reprioritized its product development
 programs to focus resources on its nearest-term opportunities to create value.
     "Our sharpened focus will moderate our expenditures, ensuring that we
 have the resources to support fully the commercial launch of our once-daily
 tramadol product in the large and growing European market, as well as the
 completion of our ongoing Phase III study in the U.S.," said James R. Howard-
 Tripp, President and Chief Executive Officer, Labopharm Inc.
 
     Once-Daily Tramadol Commercialization Programs
 
     In its European commercialization program for once-daily tramadol,
 Labopharm is working closely with its marketing partners to prepare for launch
 of the product in France, as well as in other key markets in Europe. Labopharm
 is awaiting the formal decision of the Marketing Authorization (MA) Commission
 of the Agence Francaise de Securite Sanitaire des Produits de Sante (AFSSPS)
 regarding regulatory approval of its once-daily tramadol product in France.
 Approval in France will initiate the Mutual Recognition Procedure (MRP), which
 will allow rapid approval across Europe.
     In the U.S., the Company has begun enrolling patients in its new
 Phase III clinical trial for its once-daily formulation of tramadol
 (MDT3-005). MDT3-005 is a double-blind, randomized study to compare the safety
 and efficacy of Labopharm's once-daily formulation of tramadol to placebo over
 a 12-week period in patients with osteoarthritis of the knee. The study is
 intended to support a New Drug Application (NDA) to the U.S. Food and Drug
 Administration (FDA).
 
     Results of European Phase III Trial for Once-Daily Tramadol Published
 
     The research results of Labopharm's European Phase III pivotal trial for
 its once-daily formulation of tramadol (MDT3-001) were published in the
 journal Clinical Drug Investigation (vol. 24, no. 9). The article presents
 data showing that Labopharm's once-daily formulation of tramadol (tramadol
 OAD), the Company's first product candidate incorporating its controlled-
 release technology platform, Contramid(R):
 
         -  Achieved the primary end point of the study, providing a
            statistically and clinically significant reduction in pain
            associated with osteoarthritis;
         -  Demonstrated a superior adverse events profile compared with that
            of the comparator, a twice-daily formulation of tramadol currently
            marketed in Europe;
         -  Provided sustained pain relief for a full 24-hour period, matching
            the twice-daily formulation (tramadol BID) dosed twice per day;
            and
         -  Required a dose of 200 mg or less per day to achieve effective
            pain relief for two-thirds of the patients receiving Labopharm's
            once-daily tramadol.
 
     The authors of the article, which included Dr. Gerald Mongin, principal
 investigator for MDT3-001, concluded, "The option of treatment with an
 effective once-daily formulation, such as tramadol OAD (Contramid controlled-
 release technology), offers patients with chronic pain such as
 osteoarthritis (OA) a significant advantage over faster release formulations.
 The benefit of increased compliance and convenience due to a simplified dosing
 regimen is relevant to all patients and in particular to elderly patients for
 whom simplification of treatment regimens (which often involve multiple dosing
 regimens) is also a safety issue. Since tramadol OAD provided efficacy at the
 same median daily dose (200 mg) as tramadol BID, it should be possible to
 switch patients already treated with tramadol to treatment with tramadol OAD
 on a milligram per milligram basis. This, in combination with the fact that
 the treatment with new tramadol OAD formulation offers a clinically favourable
 adverse events profile in comparison with tramadol BID and immediate release,
 supports the use of tramadol OAD as an analgesic treatment of choice in
 chronic conditions such as OA. This study demonstrated that, similar to the
 twice-daily formulation, the new once-daily tramadol formulation using
 Contramid provides analgesia that is sustained over a full 24-hour period."
 
     Other Once-Daily Tramadol Program Developments
 
     During the quarter, the Company, through its Labopharm Europe subsidiary,
 signed a definitive distribution and licensing agreement with HEXAL AG to
 market and sell Labopharm's once-daily formulation of tramadol in Germany, the
 largest pharmaceutical market in Europe. Terms of the agreement are consistent
 with those of previously announced agreements, including an initial payment
 due Labopharm upon execution of the agreement and milestone payments due
 Labopharm upon receipt of its first regulatory approval in Europe and product
 launch.
 
     Other Development and Commercialization Programs
 
     Once-Daily Betahistine - The Company has initiated a pharmacokinetic
     study.
 
     Once-Daily Trazodone - The Company has selected two prototypes and
     commenced clinical trial batch manufacturing. Labopharm and its partner,
     Gruppo Angelini, have developed a global development plan that focuses
     initially on Europe, followed by the U.S. and then other key regions of
     the world.
 
     DDS-2001 - The Company has initiated clinical trial batch manufacturing
     in preparation for a pharmacokinetic study.
 
     Polymeric Nano-Delivery System Program With Debiopharm - The Company has
     achieved the first in a series of milestones and has agreed with its
     partner, Debiopharm, to move to the next phase of development.
 
     Financial Results
 
     Revenue for the third quarter of fiscal 2004 was $419,000 compared with
 $217,000 for the third quarter of fiscal 2003. Investment income accounted for
 $181,000 of the most recent quarter's total revenue compared with $209,000 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 $226,000
 compared with $0 for the quarter ended September 30, 2003. Research and
 development contract revenue for the third quarter of 2004 was generated from
 the Company's agreements with Gruppo Angelini, under which Labopharm is
 developing a once-daily formulation of the antidepressant trazodone
 hydrochloride, and Debiopharm, under which the Company is conducting research
 on the potential oral delivery of a currently marketed intravenous cancer drug
 using its proprietary polymeric nano-delivery systems technology. During the
 third 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 nine-month period ended September 30, 2004, revenue
 was $805,000 compared with $1.2 million for the corresponding period last
 year. Investment income accounted for $381,000 of total revenue for the
 current nine-month period, while research and development contracts accounted
 for $388,000 and licensing revenues accounted for $36,000.
     Research and development expenses (net of tax credits) for the third
 quarter of fiscal 2004 were $3.3 million compared with $5.8 million for the
 third 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, as well as slowing of the development programs for a
 controlled-release formulation of gabapentin and a once-daily formulation of
 oxybutynin. For the nine-month period, research and development expenses (net
 of tax credits) were $10.4 million compared with $19.1 million 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 third quarter of
 fiscal 2004 were $2.4 million compared with $1.7 million for the third quarter
 of fiscal 2003. The increase was due primarily to increases in costs at the
 Labopharm Europe subsidiary as the Company prepares for the launch of its
 once-daily tramadol product in Europe, as well as non-cash stock-based
 compensation expense of $235,000. For the nine-month period, selling, general
 and administrative expenses were $9.0 million, including $1.6 million of
 non-recurring financing costs, compared with $5.4 million for the first nine
 months of last year.
     Cash and investments (including accrued interest) as at September 30,
 2004 were $28.6 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.
 
     Conference Call
 
     Labopharm will host a conference call today (Thursday, October 28, 2004
 at 8:30 a.m. ET) to discuss its third 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
 Thursday, November 4, 2004 at midnight. To access the archived conference
 call, dial 416-695-5800 or 1-800-408-3053 and enter the reservation number
 3106764 followed by the number sign. A live audio webcast of the conference
 call will be available at www.labopharm.com and www.financialdisclosure.ca.
 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 novel polymeric
 nano-delivery systems for delivery of water-insoluble and poorly bio-available
 drugs. For more information, please visit www.labopharm.com.
 
     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.
 
     CONSOLIDATED BALANCE SHEETS
     (Unaudited)
     -------------------------------------------------------------------------
                                                            As at       As at
                                                         Sept. 30,    Dec. 31,
                                                             2004        2003
     (Thousands of dollars)                                     $           $
     -------------------------------------------------------------------------
     ASSETS
     -------------------------------------------------------------------------
     Current
     -------------------------------------------------------------------------
       Cash and cash equivalents                            1,859         720
     -------------------------------------------------------------------------
       Short-term investments                              25,259      18,727
     -------------------------------------------------------------------------
       Accounts receivable                                  2,016       1,295
     -------------------------------------------------------------------------
       Research and development tax credits receivable        454         900
     -------------------------------------------------------------------------
       Prepaids and other assets                              406         337
     -------------------------------------------------------------------------
                                                           29,994      21,979
     -------------------------------------------------------------------------
 
     Long-term investments                                  1,278       1,281
     -------------------------------------------------------------------------
     Property, plant and equipment                         11,182      11,468
     -------------------------------------------------------------------------
     Intangible assets                                      1,961       1,991
     -------------------------------------------------------------------------
                                                           44,415      36,719
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     LIABILITIES
     -------------------------------------------------------------------------
     Current
     -------------------------------------------------------------------------
       Accounts payable and accrued liabilities             3,505       7,087
     -------------------------------------------------------------------------
       Current portion of deferred revenue                    719          46
     -------------------------------------------------------------------------
       Current portion of obligations under capital
        leases                                                158         169
     -------------------------------------------------------------------------
                                                            4,382       7,302
     -------------------------------------------------------------------------
 
     Deferred revenue                                       1,624         431
     -------------------------------------------------------------------------
     Obligations under capital leases                       5,943       6,046
     -------------------------------------------------------------------------
                                                           11,949      13,779
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     SHAREHOLDERS' EQUITY
     -------------------------------------------------------------------------
     Capital stock                                        132,622     104,035
     -------------------------------------------------------------------------
     Contributed surplus                                    4,463           -
     -------------------------------------------------------------------------
     Deficit                                             (104,619)    (81,095)
     -------------------------------------------------------------------------
                                                           32,466      22,940
     -------------------------------------------------------------------------
                                                           44,415      36,719
     -------------------------------------------------------------------------
 
 
 
     CONSOLIDATED STATEMENTS OF LOSS
     (Unaudited)
 
     -------------------------------------------------------------------------
     For periods of :            Three months ended      Nine months ended
     -------------------------------------------------------------------------
                                 Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                     2004        2003        2004        2003
     -------------------------------------------------------------------------
     (Thousands of dollars,             $           $           $           $
      except share and per
      share amounts)
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     REVENUE
     -------------------------------------------------------------------------
     Research and development         226           -         388         600
     -------------------------------------------------------------------------
     Licensing                         12           8          36           8
     -------------------------------------------------------------------------
     Investment income                181         209         381         594
     -------------------------------------------------------------------------
                                      419         217         805       1,202
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     EXPENSES
     -------------------------------------------------------------------------
     Research and development
      expenses, net                 3,265       5,755      10,357      19,053
     -------------------------------------------------------------------------
     Selling, general and
      administrative expenses       2,423       1,734       9,040       5,370
     -------------------------------------------------------------------------
     Depreciation and
      amortization                    387         410       1,223         914
     -------------------------------------------------------------------------
     Foreign exchange (gain)
      loss                              9          (8)         48          29
     -------------------------------------------------------------------------
     Interest expense                 220         212         644         358
     -------------------------------------------------------------------------
                                    6,304       8,103      21,312      25,724
     -------------------------------------------------------------------------
     LOSS BEFORE INCOME TAXES      (5,885)     (7,886)    (20,507)    (24,522)
     -------------------------------------------------------------------------
     Income taxes :
       Current                         10           3          41          11
     -------------------------------------------------------------------------
     NET LOSS FOR THE PERIOD       (5,895)     (7,889)    (20,548)    (24,533)
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     NET LOSS PER SHARE - BASIC
      AND DILUTED                   (0.14)      (0.22)      (0.53)      (0.76)
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     Weighted average number
      of common shares
      outstanding              42,489,682  35,070,373  39,111,305  32,420,480
     -------------------------------------------------------------------------
 
 
 
     CONSOLIDATED STATEMENTS OF CASH FLOWS
     (Unaudited)
 
     -------------------------------------------------------------------------
     For periods of :            Three months ended      Nine months ended
     -------------------------------------------------------------------------
                                 Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                     2004        2003        2004        2003
     -------------------------------------------------------------------------
     (Thousands of dollars)             $           $           $           $
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     OPERATING ACTIVITIES
     -------------------------------------------------------------------------
     Net loss for the period       (5,895)     (7,889)    (20,548)    (24,533)
     -------------------------------------------------------------------------
     Items not affecting cash
     -------------------------------------------------------------------------
       Depreciation of property,
        plant and equipment           381         334       1,119         721
     -------------------------------------------------------------------------
       Amortization of intangible
        assets                          6          76         104         193
     -------------------------------------------------------------------------
       Stock-based compensation       398           -       1,493           -
     -------------------------------------------------------------------------
                                   (5,110)     (7,479)    (17,832)    (23,619)
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     Net change in non-cash
      operating items                 414      (2,031)     (2,060)      1,338
     -------------------------------------------------------------------------
                                   (4,696)     (9,510)    (19,892)    (22,281)
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     INVESTING ACTIVITIES
     -------------------------------------------------------------------------
     Acquisition of investments    (3,013)    (18,074)    (34,944)    (20,846)
     -------------------------------------------------------------------------
     Disposals of investments       1,220       3,705       4,341      18,330
     -------------------------------------------------------------------------
     Maturities of investments      8,017      11,573      24,074      15,189
     -------------------------------------------------------------------------
     Acquisition of property,
      plant and equipment            (222)       (333)       (820)     (3,251)
     -------------------------------------------------------------------------
     Acquisition of intangible
      assets                          (23)        (98)        (74)       (188)
     -------------------------------------------------------------------------
                                    5,979      (3,227)     (7,423)      9,234
     -------------------------------------------------------------------------
 
     -------------------------------------------------------------------------
     FINANCING ACTIVITIES
     -------------------------------------------------------------------------
     Repayment of capital lease
      obligations                     (43)        (74)       (127)       (101)
     -------------------------------------------------------------------------
     Proceeds from issuance of
      capital stock                     4      23,336      30,777      23,553
     -------------------------------------------------------------------------
     Issuance costs of capital
      stock                           (31)     (1,375)     (2,196)     (1,375)
     -------------------------------------------------------------------------
                                      (70)     21,887      28,454      22,077
     -------------------------------------------------------------------------
     INCREASE IN CASH AND CASH
      EQUIVALENTS                   1,213       9,150       1,139       9,030
     -------------------------------------------------------------------------
     Cash and cash equivalents,
      beginning of period             646       1,598         720       1,718
     -------------------------------------------------------------------------
     CASH AND CASH EQUIVALENTS,
      END OF PERIOD                 1,859      10,748       1,859      10,748
     -------------------------------------------------------------------------
 
 
 

SOURCE Labopharm Inc.

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