Labopharm Reports Results for Third Quarter F...(the result of higher sales volumes in th...),Health

Under its licensing and distribution agreement with Purdue Pharma Products L.P. for RYZOLT(TM) in the United States, Labopharm is entitled to royalty payments of 20% of Purdue's net sales of the product (up to 25% if Purdue achieves certain net annual sales levels). Royalty revenue recorded on sales of RYZOLT in the U.S., which is recognized for accounting purposes upon dispensing of the product to the patient based on third-party prescription data (the "sell-through" method), was $0.2 million for third quarter of 2009.

Labopharm supplies finished packaged RYZOLT product at cost to Purdue, for which the Company records revenue from product sales that generate essentially no gross margin. As a result, 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 those figures. Gross margin (as a percentage of revenue from product sales) for territories outside the U.S. for the third quarter of fiscal 2009 was 65% compared with 55% for the third quarter of fiscal 2008. The increase in gross margin was due to a more favourable product mix, certain cost reduction initiatives and manufacturing efficiencies, and lower inventory write-downs in the third quarter of 2009.

Licensing revenue for the third quarter of fiscal 2009 was $1.2 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 third quarter of fiscal 2008 was $5.6 million and included non-recurring licensing revenue of $4.4 million related to the Company's reacquisition of the rights to its once-daily tramadol
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