- Company to Submit Response to FDA for Novel Trazodone

Formulation Next Week -

LAVAL, QC, Aug. 7 /CNW/ - Labopharm Inc. (TSX: DDS; NASDAQ: DDSS) today reported its financial results for the second quarter ended June 30, 2009. All figures are in Canadian dollars unless otherwise stated.

"The second quarter of 2009 was highlighted by the U.S. commercial launch of RYZOLT(TM) by our marketing partner, Purdue Pharma," said James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc. "We are encouraged by a number of aspects since the launch, including the growth of new prescriptions and the migration of patients to higher dosage strengths, which shows the product is being used as intended. However, the product was launched into a challenging market impacted by seasonality and a weakened U.S. economy. We continue to believe that RYZOLT offers physicians and patients an excellent option in the treatment of pain and are confident in the long-term prospects for our product in the U.S. market."

Added Mr. Howard-Tripp, "In Canada, our experience shows that with a strong marketing effort, our once-daily tramadol product performs well over time. In fact, in May and June of this year, our once-daily tramadol product was the best selling tramadol product in the country."

"We continue to prepare for commercialization of our novel trazodone formulation in the U.S.," concluded Mr. Howard-Tripp. "Following discussions with the U.S. Food and Drug Administration regarding its complete response letter and our API supplier's submission of its action plan to address deficiencies at its manufacturing facility, we intend to file our response with the FDA next week."

Financial Summary

Revenue for the second quarter of fiscal 2009 increased to $6.3 million from $4.9 million for the second quarter of fiscal 2008. Revenue from sales of the Company's once-daily tramadol product for the second quarter of fiscal 2009 increased to $4.8 million from $3.9 million for the second quarter of fiscal 2008 and was composed of product sales outside the U.S. of $3.0 million and product sales in the U.S. of $1.8 million. Royalty revenue recorded on sales of RYZOLT in the U.S. for the quarter was $0.1 million. Considering that RYZOLT was just recently launched in May 2009, Labopharm is recording its royalty earned for the quarter based on the sell- through method, under which revenue is recognized, for accounting purposes, upon dispensing of the product to the patient based on third-party prescription data. Licensing revenue for the second quarter of fiscal 2009 was $1.3 million compared with $1.1 million for the second quarter of fiscal 2008.

Adjusted gross margin for sales outside of the U.S. for the second quarter of fiscal 2009 was 66% compared with 56% for the second quarter of fiscal 2008. Research and development expenses, before research and development tax credits, for the second quarter of fiscal 2009 were $3.2 million compared with $7.0 million for the second quarter of fiscal 2008. Selling, general and administrative expenses for the second quarter of fiscal 2009 were $6.3 million compared with $6.2 million for the second quarter of fiscal 2008 and included an accrual of $1.3 million for the Company's share of litigation costs related to patent enforcement following approval of its once-daily tramadol product in the U.S. Net loss for the second quarter of fiscal 2009 was $4.9 million, or $0.09 per share, compared with $10.3 million, or $0.18 per share, for the second quarter of fiscal 2008.

Recent Developments

Once-Daily Tramadol

Product Launched in the United States - Labopharm's product was launched in the U.S. in May under the brand name RYZOLT by Purdue Pharma Products L.P., the Company's licensing and distribution partner. Although RYZOLT was launched into a challenging market, the Company remains confident in the prospects for its product in the U.S.

Product Achieves Number One Position in Canada in May and June - Labopharm's product (marketed under the brand name Tridural(TM) in Canada) ranked number one in Canada among tramadol products (excluding combination products) in terms of prescriptions in May and June 2009 with 39% and 42% market share, respectively. The number of prescriptions written for Labopharm's product in Canada for the second quarter of 2009 increased 24% compared to the first quarter of 2009.

In-Market Sales in Europe Continue to Grow - In-market sales of Labopharm's product in Europe(1) grew 7% for the first five months of 2009 compared to the same period of 2008.

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(1) Includes France, Germany, the United Kingdom, Spain and Italy.

Novel Trazodone Formulation

Company to Submit Response to FDA - Following discussions with the U.S. Food and Drug Administration (FDA), Labopharm intends to submit its response to the Agency next week. As previously disclosed, the Company received a complete response letter from the FDA indicating that its new drug application (NDA) cannot be approved in its present form due to deficiencies following an FDA inspection of the active pharmaceutical ingredient (API) manufacturing facility. The API manufacturer submitted an action plan addressing the deficiencies on Friday, July 24, 2009.

Submitted Regulatory Application in Canada - Labopharm filed a new drug submission (NDS) with the Therapeutic Products Directorate (TPD) of Health Canada on August 4, 2009. Upon acceptance by Health Canada, the Company expects a response to its submission in the second quarter of 2010.

Corporate

Amended Debt Facility Agreement with Hercules - Labopharm amended its debt facility agreement with Hercules Technology Growth Capital, Inc. (NASDAQ: HTGC) to provide more favourable repayment terms by extending the date required to begin repaying the loan to July 1, 2010 from July 1, 2009. The maturity date of the loan has been extended to June 1, 2012 from December 1, 2011.

Entered into Credit Facility with National Bank - Labopharm entered into a three-year $2.6 million revolving credit facility with National Bank of Canada, which the Company drew down in full subsequent to quarter end. The facility is in furtherance of a previously announced agreement with National Bank of Canada to borrow an amount of up to 45% of the principal value of the notes issued to the Company in the context of the restructuring of the Canadian asset-backed commercial paper, which amount the Company can, under certain conditions, repay at maturity by delivering the notes to the bank.

Financial Results

Three-Month Period Ended June 30, 2009

Revenue for the second quarter of fiscal 2009 increased to $6.3 million from $4.9 million for the second quarter of fiscal 2008. During the second quarter, Labopharm shipped its first product to Purdue Pharma in advance of the launch of RYZOLT. Revenue from product sales in all territories for the second quarter of fiscal 2009 increased to $4.8 million from $3.9 million for the second quarter of fiscal 2008. Revenue from product sales to territories other than the U.S. was $3.0 million compared with $3.9 million for the second quarter of fiscal 2008. The decrease was the result of lower sales volumes due to the variable ordering pattern of the Company's licensing and distribution partners from period to period, which were partially offset by higher average selling prices per tablet in the second quarter of fiscal 2009. Product sales to the U.S. were $1.8 million.

Under its licensing and distribution agreement with Purdue for RYZOLT in the United States, Labopharm is entitled to royalty payments of 20% of Purdue's net sales of the product to distributors as defined in the agreement (up to 25% if Purdue achieves certain net annual sales levels). Royalty revenue recorded on sales of RYZOLT in the U.S. for the quarter was $0.1 million. Considering that RYZOLT was just recently launched in May 2009, Labopharm is recording its royalty earned for the quarter based on the sell- through method, under which revenue is recognized, for accounting purposes, upon dispensing of the product to the patient based on third-party prescription data.

Labopharm supplies finished packaged RYZOLT product at cost to Purdue Pharma, for which the Company records revenue from product sales that generate no gross margin. As a result, the adjusted gross margin figures discussed below exclude sales and cost of goods sold for product sold in the U.S. to provide a more meaningful understanding of the gross margin. Adjusted gross margin (as a percentage of revenue from product sales) for territories outside the U.S. for the second quarter of fiscal 2009 was 66% compared with 56% for the second quarter of fiscal 2008. Adjusted gross margin for territories outside the U.S. for the second quarter of fiscal 2009 excludes the reversal of $0.2 million of previously recorded write downs.