Labopharm Reports Results for Third Quarter F...(esult of higher volumes due to shipments...),Health

Gross margin for the first nine months of fiscal 2007, excluding the provision for once-daily tramadol pre-launch inventory and related deposits to manufacturers taken in the second quarter following the delay in the anticipated U.S. launch of once-daily tramadol, net of the non-recurring favourable adjustment discussed for the quarter, increased to 50% from 44% for the first nine months of fiscal 2006. The increase in adjusted gross margin for the first nine months of 2007 was due to higher average selling prices, primarily attributable to the Canadian launch of once-daily tramadol and lower manufacturing costs, which were partially offset by a royalty expense payable to an affiliate of Purdue Pharma to avoid any potential conflict with respect to patents.

Licensing revenue for the first nine months of fiscal 2007 was $4.8 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 first nine months of fiscal 2006 was $6.8 million. The decrease in licensing revenues was the result of the extensions of the estimated term over which the Company is recognizing the US$20 million up- front payment previously received from Purdue Pharma.

Research and development expenses before research and development tax credits for the first nine months of fiscal 2007 increased to $19.5 million from $14.3 million for the first nine months of fiscal 2006. The increase was primarily due to the Phase III clinical trial for once-daily trazodone that was initiated in the second quarter of fiscal 2007, several pharmacokinetic studies for additional development programs and the general increase in the Company's research and development activities. Research and development tax credits
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