LAVAL, QC, Nov. 2 /PRNewswire-FirstCall/ - Labopharm Inc. today reported its results for the third quarter of fiscal 2006, ended September 30, 2006. All figures are in Canadian dollars unless otherwise stated.
Update on U.S. Regulatory Approval Process for Once-Daily Tramadol
The Company’s top priority remains the approval of its once-daily tramadol formulation in the U.S. Following receipt of the Approvable Letter for once-daily tramadol on September 28, 2006, Labopharm has initiated discussions with the U.S. Food and Drug Administration (FDA) to resolve the FDA’s issues. The Company expects these discussions to continue until it has identified the most appropriate course of action to obtain final approval.
“We have had an initial meeting with the FDA regarding our Approvable Letter for once-daily tramadol and are making progress toward determining the appropriate path forward in pursuit of final regulatory approval,” said James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc. “We understand that the lack of information with regard to this matter is frustrating to our shareholders, however, we firmly believe that providing detailed disclosure at this time would be counterproductive to the approval process.”
Update on European Commercialization Program for Once-Daily Tramadol - United Kingdom - Labopharm has made its first shipment of product to its marketing partner for the United Kingdom, Recordati, which is scheduled to launch the product in early 2007. - Italy - Labopharm’s product has received price approval for Italy. The Company expects to make its first shipment of product imminently, with launch of the product scheduled before the end of the year. - France, Spain, and Belgium - Labopharm expects to begin shipping product to its marketing partners in France, Spain, and Belgium before the end of the year, with launches scheduled for early 2007.
Labopharm also expects additional launches throughout Europe by its marketing partner CSC Pharmaceuticals over the next six months.
NDS for Once-Daily Tramadol Accepted for Review in Canada - Labopharm’s New Drug Submission (NDS) for its once-daily formulation of tramadol was accepted for review by the Therapeutic Products Directorate of Health Canada. The NDS is subject to a targeted 300-day review period.
Financial Results
Revenue for the third quarter of 2006 was $3.3 million compared with $72,000 for the third quarter of fiscal 2005. Product sales were $1.1 million and consisted of sales of the Company’s once-daily tramadol product to HEXAL AG for distribution in Germany and to CSC Pharmaceuticals for distribution in the Czech Republic and Slovakia. The Company did not have product sales in the third quarter of fiscal 2005. Licensing revenue for the third quarter was $2.2 million, representing a portion of previously received up-front and milestone payments from the Company’s licensing and distribution partners for the U.S. and Europe, which are being recognized over the term of the Company’s obligations under those arrangements. Licensing revenue for the third quarter of fiscal 2005 was $11,000.
Research and development expenses before tax credits for the third quarter of fiscal 2006 decreased to $3.4 million from $4.7 million for the third quarter of fiscal 2005. The decrease was primarily due to the incurrence of costs related to the Company’s clinical trial program for once-daily tramadol and for the validation of the commercial manufacturing process for once-daily tramadol at a second manufacturer in the corresponding period of last year. The decrease was partially offset by a general increase in the Company’s research and development capacity. Tax credits for the third quarter of fiscal 2006 decreased to $779,000 from $838,000 for the corresponding quarter of fiscal 2005.
Selling, general and administrative costs for the third quarter of fiscal 2006 increased to $4.1 million from $2.7 million for the third quarter of fiscal 2005. The increase for the quarter is primarily due to higher headcount and related compensation expense as the Company transitions from a research and development company to a commercial operation. Increased costs were also incurred for executive and board of directors recruitment, severance costs, patent consulting fees and incremental costs resulting from the NASDAQ listing. Financial expenses for the quarter were $0.6 million compared with $0.8 million for the third quarter of fiscal 2005. The decrease was the result of the declining balances of the Company’s term loan and capital leases. Income tax expense for the quarter was $0.6 million compared to $0.3 million for the third quarter of fiscal 2005.
Net loss for the third quarter of fiscal 2006 decreased to $4.4 million, or $0.08 per share, from $7.5 million, or $0.18 per share, for the third quarter of fiscal 2005.
Cash, cash equivalents and short-term investments as at September 30, 2006 were $106.3 million, compared with $34.9 million as at December 31, 2005. The increase was primarily the result of the generation of net proceeds of $103.5 million from the cross-border equity financing completed in May 2006.
For the nine-month period ended September 30, 2006, revenue was $10.7 million compared with $0.8 million for the corresponding period of fiscal 2005. Product sales were $4.0 million and licensing revenue was $6.7 million, representing a portion of previously received up-front and milestone payments from the Company’s licensing and distribution partners for the U.S. and Europe. Licensing revenue for the corresponding period of fiscal 2005 was $0.8 million.
Research and development expenses before tax credits for the first nine months of fiscal 2006 were $14.3 million compared to $14.5 million for the first nine months of fiscal 2005. The decrease was primarily due to lower clinical trial activity during the first nine months of 2006, which was partially offset by a general increase in the Company’s research and development capacity, as well as consulting fees incurred for the preparation of the Canadian and U.S. regulatory submissions for once-daily tramadol.
Selling, general and administrative costs for the nine months of fiscal 2006 increased to $11.1 million from $7.9 million for the corresponding period of fiscal 2005. The increase is consistent with the rationale provided for the three-month period. Financial expenses for the first nine months of the year were $2.1 million compared with $1.2 million for the first nine months of last year. Income tax expense for the first nine months of the year was $1.2 million compared to $0.3 for the first nine months of last year.
Net loss for the first nine months of fiscal 2006 decreased to $16.7 million, or $0.33 per share, from $22.3 million, or $0.52 per share, for the corresponding period of fiscal 2005.
About Labopharm Inc.
Labopharm Inc. is an international, specialty pharmaceutical company focused on the development of drugs incorporating the Company’s proprietary advanced controlled-release technologies. For more information, please visit www.labopharm.com.
This press release contains forward-looking statements that involve a number of risks and uncertainties relating to the Company’s once-daily tramadol product in the United States that could cause actual results to differ materially from those indicated in the forward looking statements. These statements reflect the Company’s current expectations regarding future events. Specifically the risks and uncertainties the Company faces include but are not limited to: the Company’s ability to resolve the issues identified by the FDA to the FDA’s satisfaction in a timely manner; the uncertainties related to the regulatory process, including regulatory approval, and the commercialization of the drug thereafter. There can be no assurance that the Company will be able to resolve the issues identified by the FDA using existing data, or at all. If the Company is unable to resolve the issues identified by the FDA using existing data, it would need to generate additional data in order to obtain FDA approval. The Company’s once-daily formulation of tramadol may not be legally marketed in the United States prior to approval by the FDA. 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 BALANCE SHEETS (Unaudited) As at As at Sept. 30, Dec. 31, 2006 2005 (Thousands of Canadian dollars) $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 15,518 20,282 Short-term investments 90,750 14,611 Accounts receivable 3,343 532 Research and development tax credits receivable 1,558 875 Income tax receivable 437 426 Inventories 5,999 2,188 Prepaid expenses and other assets 1,135 452 ------------------------------------------------------------------------- Total current assets 118,740 39,366 ------------------------------------------------------------------------- Restricted long-term investments 1,272 1,271 Property, plant and equipment 10,193 10,280 Intangible assets 3,195 3,231 Deferred financing costs 202 364 Future tax assets 71 - ------------------------------------------------------------------------- 133,673 54,512 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) Current Accounts payable and accrued liabilities 7,421 10,090 Current portion of deferred revenue 9,177 9,067 Current portion of obligations under capital leases 91 83 Current portion of long-term debt 4,029 3,383 ------------------------------------------------------------------------- Total current liabilities 20,718 22,623 ------------------------------------------------------------------------- Deferred revenue 14,822 20,834 Obligations under capital leases 5,771 5,840 Long-term debt 4,384 7,818 ------------------------------------------------------------------------- Total liabilities 45,695 57,115 ------------------------------------------------------------------------- Shareholders’ equity (deficiency) Common shares, no par value, unlimited shares authorized, 56,747,963 and 43,673,863 issued and outstanding as at September 30, 2006 and as at December 31, 2005, respectively 241,588 135,631 Contributed surplus 7,674 6,350 Deficit (161,284) (144,584) ------------------------------------------------------------------------- Total shareholders’ equity (deficiency) 87,978 (2,603) ------------------------------------------------------------------------- 133,673 54,512 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the: Three months ended Nine months ended (Thousands of Canadian Sept. 30, Sept. 30, Sept. 30, Sept. 30, dollars, except share 2006 2005 2006 2005 and per share amounts) $ $ $ $ ------------------------------------------------------------------------- REVENUE Product sales 1,097 - 4,044 - Cost of goods sold, including depreciation expense of $18 and $34 for the three months and the nine months ended September 30, 2006 respectively (2005 - nil) 709 - 2,301 - ------------------------------------------------------------------------- Gross profit on product sales 388 - 1,743 - OTHER REVENUE Licensing 2,229 11 6,672 762 Research and development contracts - 61 - 61 ------------------------------------------------------------------------- 2,617 72 8,415 823 EXPENSES AND OTHER INCOME Research and development expenses 3,390 4,676 14,286 14,537 Government assistance (779) (838) (1,820) (1,583) ------------------------------------------------------------------------- 2,611 3,838 12,466 12,954 Selling, general and administrative expenses 4,069 2,682 11,060 7,854 Financial expenses 644 758 2,056 1,168 Depreciation and amortization 412 416 1,242 1,235 Interest income (1,271) (110) (2,277) (347) Foreign exchange gain (50) (221) (643) (33) ------------------------------------------------------------------------- 6,415 7,363 23,904 22,831 ------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES (3,798) (7,291) (15,489) (22,008) Income taxes : Current 598 258 1,282 259 Future (35) - (71) - ------------------------------------------------------------------------- NET LOSS FOR THE PERIOD (4,361) (7,549) (16,700) (22,267) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NET LOSS PER SHARE - BASIC AND DILUTED (0.08) (0.18) (0.33) (0.52) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares outstanding 56,747,093 43,003,982 50,938,493 42,809,354 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the: Three months ended Nine months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, (Thousands of 2006 2005 2006 2005 Canadian dollars $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (4,361) (7,549) (16,700) (22,267) Items not affecting cash: Depreciation of property, plant and equipment 375 381 1,105 1,131 Amortization of intangible assets 55 35 171 104 Amortization of deferred financing costs 51 40 162 40 Financial expenses - 134 - 134 Unrealized foreign exchange gain (74) (206) (547) (25) Future income taxes (35) - (71) - Stock-based compensation 492 153 1,857 800 ------------------------------------------------------------------------- (3,497) (7,012) (14,023) (20,083) Net change in non-cash operating items (6,274) 940 (15,941) 1,311 ------------------------------------------------------------------------- (9,771) (6,072) (29,964) (18,772) ------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisition of short-term investments (73,741) (4,591) (99,138) (8,389) Disposals of short-term investments 2,500 - 2,500 958 Maturities of short-term investments 4,585 6,451 20,499 23,654 Acquisition of property, plant and equipment (437) (391) (1,018) (749) Acquisition of intangible assets (25) (41) (690) (127) ------------------------------------------------------------------------- (67,118) 1,428 (77,847) 15,347 ------------------------------------------------------------------------- FINANCING ACTIVITIES Repayment of capital lease obligations (21) (24) (61) (114) Proceeds from issuance of capital stock 120 330 114,664 1,190 Issuance costs of capital stock (1,456) - (9,240) - Repayment of long-term debt (903) - (2,307) - Proceeds from issuance of long-term debt - - - 11,586 Proceeds from issuance of warrants - - - 731 Deferred financing costs - (320) - (474) ------------------------------------------------------------------------- (2,260) (14) 103,056 12,919 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents held in foreign currencies (12) (395) (9) (645) Net increase (decrease) in cash and cash equivalents (79,161) (5,053) (4,764) 8,849 Cash and cash equivalents, beginning of period 94,679 16,711 20,282 2,809 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 15,518 11,658 15,518 11,658 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows include the following items: Interest paid 483 467 1,542 877 Income taxes paid 31 - 145 1 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Labopharm Inc.
CONTACT: At Labopharm: Mark D’Souza, Chief Financial Officer, Tel: (450)680-2444, mdsouza@labopharm.com; At The Equicom Group: Jason Hogan, Mediaand Investor Relations, Tel: (416) 815-0700, jhogan@equicomgroup.com;French: Eric Bouchard, Tel: (514) 208-5939, ebouchard@equicomgroup.com
