Labopharm Reports Results for Second Quarter F...(partially offset by higher average selli...),Health

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. The increase in adjusted gross margin was due primarily to a higher average selling price per tablet.

Licensing revenue for the second quarter of fiscal 2009 was $1.3 million and represented a portion of licensing payments received from the Company's licensing and distribution partners for once-daily tramadol. Licensing revenue for the second quarter of fiscal 2008 was $1.1 million.'/>"/>