LAVAL, QC, Feb. 16 /PRNewswire-FirstCall/ - Labopharm Inc. today reported its results for the fourth quarter and year end fiscal 2006, ended December 31, 2006. All figures are in Canadian dollars unless otherwise stated.
“2006 was a watershed year for Labopharm as we significantly advanced the global commercialization program for once-daily tramadol and took important steps in our evolution to full integration,” said James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc. “Our product is now launched broadly across Europe, including the top five markets, with additional launches scheduled throughout 2007. Having received an approvable letter from the FDA for once-daily tramadol, we continue to prepare for launch as rapidly as possible upon anticipated final approval. At the same time, we continue to focus on our next product opportunities, including a once-daily formulation of trazodone, as well as line extensions for once-daily tramadol and potential products based on alternative presentations of Contramid and our Polymeric Nano-Delivery Systems technology. Finally, we continue to strengthen our capabilities throughout the organization, adding expertise across all facets of our business to support our future growth.”
Key Developments Global Commercialization Program for Once-Daily Tramadol
Once-Daily Tramadol Broadly Launched in Europe - Labopharm’s once-daily tramadol product has now been launched throughout the majority of the existing European market for tramadol. During the fourth quarter of 2006, once-daily tramadol was launched by the Company’s marketing partner in Italy under the brand name Unitrama(R). Early in the New Year, once-daily tramadol was launched by the Company’s marketing partners in France under the brand names Monoalgic L.P. (sanofi-aventis) and Monotramal (Grunenthal), the UK under the brand name Tradorec XL, Spain under the brand name Dolpar, and Belgium under the brand name Contramal Uno(R).
Response to Approvable Letter Accepted for Review by U.S. FDA - Labopharm’s response to matters raised by the U.S. Food and Drug Administration (FDA) in the approvable letter for Labopharm’s once-daily formulation of tramadol has been accepted for review by the FDA as complete. The action date assigned by the FDA under the Prescription Drug User Fee Act (PDUFA) is June 19, 2007.
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 Company expects the results of the review around mid-year.
Submitted Marketing Application in Australia - Labopharm submitted a marketing application to the Therapeutic Goods Administration (TGA) of the Australian government’s Department of Health and Aging, seeking regulatory approval to permit its once-daily tramadol product to be marketed in that country. The Company is in active discussions to secure a marketing partner for Australia.
Financial Results
Revenue for the fourth quarter of 2006 was $5.2 million compared with $2.4 for the fourth quarter of fiscal 2005. Product sales were $2.8 million compared with $1.3 million for the fourth quarter of fiscal 2005. The increase was primarily the result of shipments of once-daily tramadol for launch in a higher number of markets compared to shipments for a single market in the fourth quarter of 2005. Product sales for the fourth quarter of fiscal 2006 consisted of follow-on shipments of the Company’s once-daily tramadol product to HEXAL AG for distribution in Germany and to CSC Pharmaceuticals S.A. for distribution in the Czech Republic and Slovakia, as well as initial shipments to sanofi-aventis for distribution in France, to Grunenthal GmbH for distribution in Belgium, to Recordati for distribution in the United Kingdom, to Gruppo Angelini for distribution in Italy and to Esteve S.A. for distribution in Spain.
Gross margin for the fourth quarter of fiscal 2006 was $0.1 million, or 4%, compared to $0.5 million, or 40%, for the fourth quarter of fiscal 2005. Gross margin for the fourth quarter of fiscal 2006 was impacted by the write-off of $1.4 million of inventory, $1.0 million of which was the result of the Company’s determination that product from a single small-scale manufacturer did not meet manufacturing specifications. Given that, since the third quarter, the Company has been shipping product to Europe manufactured by its second, larger-scale manufacturer, all product orders have been fulfilled in full and on time. Labopharm is pursuing compensation from the manufacturer as provided for in the supply agreement. Excluding this write-off, adjusted gross margin for fourth quarter of fiscal 2006 was 55%.
Licensing revenue for the fourth quarter was $2.3 million, representing a portion of licensing payments previously received and received during the quarter from the Company’s licensing and distribution partners for once-daily tramadol. Licensing revenue for the fourth quarter of fiscal 2005 was $1.1 million.
Research and development expenses before tax credits for the fourth quarter of fiscal 2006 decreased to $4.4 million from $7.9 million for the fourth quarter of fiscal 2005. The decrease was primarily due to the timing of clinical trial activity, particularly MDT3-005 for once-daily tramadol, which was ongoing in the fourth quarter of 2005 and completed in the second quarter of 2006. The decrease was partially offset by a general increase in the Company’s research and development capacity. Government assistance (research and development tax credits) for the fourth quarter of fiscal 2006 increased to $1.3 million from $1.1 million for the corresponding quarter of fiscal 2005.
Selling, general and administrative expenses for the fourth quarter of fiscal 2006 increased to $6.0 million from $4.3 million for the fourth quarter of fiscal 2005. The increase is primarily the result of higher costs related to the Company’s transition from a research and development company to a commercial operation, as well as higher compensation expense due to growth in headcount. Financial expenses for the quarter were $0.6 million compared with $0.8 million for the fourth quarter of fiscal 2005. The decrease was the result of the declining balances of the Company’s term loan and capital leases. Interest income for the quarter was $1.1 million compared with $0.2 million for the same quarter in 2005. Income tax expense for the quarter was unchanged compared to the fourth quarter of fiscal 2005 at $0.9 million.
Net loss for the fourth quarter of fiscal 2006 decreased to $7.2 million, or $0.13 per share, from $11.1 million, or $0.26 per share, for the fourth quarter of fiscal 2005.
Cash, cash equivalents and marketable securities at December 31, 2006 were $99.5 million compared with $34.9 million 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, as well as the receipt of $3.4 million in licensing payments from the Company’s European partners for once-daily tramadol. The increase was offset by the use of funds for operating activities.
For the twelve-month period ended December 31, 2006, revenue was $15.9 million compared with $3.2 million for fiscal 2005. Product sales were $6.9 million compared to 1.3 million for fiscal 2005. The increase was the result of shipments of once-daily tramadol for a higher number of markets, as well as a full year of sales in Germany in 2006, compared to shipments for a single market and a partial year of sales in 2005.
Gross margin for fiscal 2006 was $1.9 million, or 27%, compared to $0.5 million, or 40% for fiscal 2005. Gross margin for fiscal 2006 was impacted by the aforementioned write-off of $1.4 million of inventory as discussed for the quarter. Excluding the write-off, adjusted gross margin for fiscal 2006 was 48%.
Licensing revenue was $9.0 million, representing a portion of up-front and milestone payments received from the Company’s licensing and distribution partners for the U.S. and Europe. Licensing revenue for the corresponding period of fiscal 2005 was $1.9 million.
Research and development expenses before tax credits for fiscal 2006 decreased to $18.7 million from $22.5 million for fiscal 2005. The decrease was primarily due to the timing of clinical trial activity, particularly MDT3-005 for once-daily tramadol, which was ongoing in 2005 and completed in the second quarter of 2006, as well as costs for validation of the commercial manufacturing process that were incurred in 2005 and not in 2006. The decrease was partially offset by a general increase in the Company’s research and development capacity in 2006, as well as by consulting fees incurred for the preparation of the Canadian and U.S. regulatory submissions for once-daily tramadol. Government assistance for fiscal 2006 increased to $3.1 million from $2.7 million for fiscal 2005.
Selling, general and administrative costs for fiscal 2006 increased to $17.0 million from $12.2 million for fiscal 2005. The increase is primarily the result of higher costs related to the Company’s transition from a research and development company to a commercial operation, as well as higher stock based compensation expense. Financial expenses for fiscal 2006 were $2.7 million compared with $1.9 million for fiscal 2005. Interest income for fiscal 2006 was $3.4 million compared with $0.6 million for fiscal 2005. Income tax expense for fiscal 2006 was $2.1 million compared with $1.2 for fiscal 2005.
Net loss for fiscal 2006 decreased to $23.9 million, or $0.46 per share, from $33.3 million, or $0.78 per share, for fiscal 2005.
The Company expects total research and development and selling, general and administrative expenses for fiscal 2007 to increase to approximately $46 to $48 million, reflecting the commencement of Phase III clinical activity for the once-daily trazodone development program, as well as spending related to the development programs for other pipeline products and expansion of the Company’s sales and marketing function in the U.S. and globally to support its marketing partners in the commercialization of once-daily tramadol.
Conference Call
Labopharm will host a conference call today (Friday, February 16, 2007 at 8:30 a.m. ET) to discuss its fourth quarter and year end fiscal 2006 results. To access the conference call by telephone, dial 416-644-3416 or 1-800-732-9307. Please connect approximately five minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Friday, February 23, 2007 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21217050 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 Inc. is an international specialty pharmaceutical company focused on the development of drugs incorporating the Company’s proprietary advanced controlled-release technologies. The Company’s lead product, a once-daily formulation of the analgesic tramadol, has been approved and launched in Europe and is currently under review for approval by the U.S. Food and Drug Administration. 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 uncertainties related to the regulatory process and the commercialization of the Corporation’s products thereafter, if they are approved. 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 STATEMENTS OF OPERATIONS For periods of : Three months ended Twelve months ended (Thousands of dollars, Dec. 31, Dec. 31, Dec. 31, Dec. 31, except share and per 2006 2005 2006 2005 share amounts) $ $ $ $ ------------------------------------------------------------------------- REVENUE Product sales 2,819 1,269 6,863 1,269 Cost of goods sold 2,697 758 4,998 758 ------------------------------------------------------------------------- Gross profit on product sales 122 511 1,865 511 Other revenue Licensing 2,339 1,146 9,011 1,908 Research and development contracts - - - 61 ------------------------------------------------------------------------- 2,461 1,657 10,876 2,480 ------------------------------------------------------------------------- EXPENSES Research and development expenses 4,430 7,914 18,716 22,451 Government assistance (1,258) (1,130) (3,078) (2,713) ------------------------------------------------------------------------- 3,172 6,784 15,638 19,738 Selling, general and administrative expenses 5,954 4,334 17,014 12,188 Financial expenses 598 769 2,654 1,937 Depreciation and amortization 444 429 1,686 1,664 Interest income (1,102) (210) (3,379) (557) Foreign exchange gain (365) (322) (1,008) (355) ------------------------------------------------------------------------- 8,701 11,784 32,605 34,615 ------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES (6,240) (10,127) (21,729) (32,135) Income taxes 925 940 2,136 1,199 ------------------------------------------------------------------------- NET LOSS FOR THE PERIOD (7,165) (11,067) (23,865) (33,334) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NET LOSS PER SHARE - BASIC AND DILUTED (0.13) (0.26) (0.46) (0.78) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares outstanding 56,747,963 43,273,531 52,402,798 42,922,741 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS For periods of : Three months ended Twelve months ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 (Thousands of dollars) $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (7,165) (11,067) (23,865) (33,334) Items not affecting cash: Depreciation of property, plant and equipment 409 393 1,514 1,524 Amortization of intangible assets 59 36 230 140 Amortization of premium or discount on marketable securities 146 - 146 - Amortization of deferred financing costs 46 70 208 110 Financial expenses - 137 - 271 Unrealized foreign exchange gain (374) (207) (921) (232) Future income taxes (63) - (134) - Stock-based compensation 743 954 2,600 1,754 ------------------------------------------------------------------------- (6,199) (9,684) (20,222) (29,767) Net change in non-cash operating items 1,069 27,416 (14,872) 28,727 ------------------------------------------------------------------------- (5,130) 17,732 (35,094) (1,040) ------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisition of marketable securities (7,138) (12,051) (106,276) (20,440) Disposals of marketable securities 2,500 - 5,000 958 Maturities of marketable securities 9,495 2,031 29,994 25,685 Acquisition of property, plant and equipment (693) (94) (1,711) (843) Acquisition of intangible assets (676) (46) (1,366) (173) ------------------------------------------------------------------------- 3,488 (10,160) (74,359) 5,187 ------------------------------------------------------------------------- FINANCING ACTIVITIES Repayment of capital lease obligations (22) (20) (83) (134) Proceeds from issuance of capital stock - 903 114,664 2,093 Issuance costs of capital stock - - (9,240) - Repayment of long-term debt (964) - (3,271) - Proceeds from issuance of long term debt - - - 11,586 Proceeds from issuance of warrants - - - 731 Deferred financing costs - - - (474) ------------------------------------------------------------------------- (986) 883 102,070 13,802 ------------------------------------------------------------------------- Foreign exchange gain (loss) on cash held in foreign currencies 832 169 823 (476) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PERIOD (1,796) 8,624 (6,560) 17,473 Cash and cash equivalents, beginning of period 15,518 11,658 20,282 2,809 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 13,722 20,282 13,722 20,282 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows include the following items: Interest paid 452 557 1,994 1,434 Income taxes paid 488 426 633 427 ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS As at As at Dec. 31, Dec. 31, 2006 2005 (Thousands of dollars) $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 13,722 20,282 Marketable securities 85,747 14,611 Accounts receivable 4,002 532 Research and development tax credits receivable 1,869 875 Income tax receivable 939 426 Inventories 5,287 2,188 Prepaids and other assets 1,384 452 ------------------------------------------------------------------------- Total current assets 112,950 39,366 ------------------------------------------------------------------------- Restricted long-term investments 1,280 1,271 Property, plant and equipment 10,909 10,280 Intangible assets 3,205 3,231 Deferred financing costs 156 364 Future income tax 134 - ------------------------------------------------------------------------- 128,634 54,512 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current Accounts payable and accrued liabilities 8,908 10,090 Current portion of deferred revenue 7,916 9,067 Current portion of obligations under capital leases 94 83 Current portion of long term debt 4,425 3,383 ------------------------------------------------------------------------- Total current liabilities 21,343 22,623 ------------------------------------------------------------------------- Deferred revenue 16,593 20,834 Obligations under capital leases 5,746 5,840 Long term debt 3,396 7,818 ------------------------------------------------------------------------- Total liabilities 47,078 57,115 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY (DEFICIENCY) Capital stock 241,588 135,631 Contributed surplus 8,417 6,350 Deficit (168,449) (144,584) ------------------------------------------------------------------------- Total shareholders’ equity (deficiency) 81,556 (2,603) ------------------------------------------------------------------------- 128,634 54,512 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Labopharm Inc.
CONTACT: 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) 208-5939, ebouchard@equicomgroup.com
