Labopharm's first-quarter fiscal 2010 revenues from product sales decrease $0.4M to $3.2M

May 6 2010

- Angelini Labopharm Joint Venture to Launch OLEPTRO(TM) in Third Quarter of This Year -

Labopharm Inc. (TSX: DDS; NASDAQ: DDSS) today reported its financial results for the first quarter 2010. All figures are in Canadian dollars unless otherwise stated.

"With our joint venture with Angelini, we are well positioned for the U.S. launch of OLEPTRO(TM) in the third quarter of this year," said James R. Howard-Tripp, President and Chief Executive Officer, Labopharm Inc. "Following the launch of OLEPTRO(TM), we will have two products commercialized and generating revenue, supported by a pipeline of additional product opportunities. In particular, our INTELLITAB(TM) misuse and abuse-deterrent technology platform, which has the ability to deliver two active ingredients in a single tablet, shows considerable promise and we look forward to advancing multiple products with this platform."

Angelini Labopharm Preparing to Launch OLEPTRO(TM)

Launch preparations for OLEPTRO(TM), the Company's novel once-daily formulation of trazodone for the treatment of major depressive disorder in adults, are nearing completion. The OLEPTRO(TM) commercial strategy, including marketing and managed market access strategies, is finalized. Manufacturing of product inventory for launch is complete, supply and logistics distribution is underway, medical affairs functions deployed and sales force build-out commenced using a leading contract sales organization.

Labopharm's recently announced joint venture, Angelini Labopharm, plans to launch OLEPTRO(TM) in the U.S. with a specialty pharmaceutical sales force, whose focus will be on psychiatrists and targeted primary care physicians. A multifaceted marketing and promotional campaign is planned to support the OLEPTRO(TM) launch.

INTELLITAB(TM)

Labopharm recently announced the first product being developed using its INTELLITAB(TM) misuse and abuse-deterrent technology platform is a twice-daily formulation of oxycodone and acetaminophen (DDS-08B). More than 37 million prescriptions were written for oxycodone-acetaminophen combination products in the U.S. in 2009. The Company recently reported positive results from the pharmacokinetic study on both intact and crushed tablets. Based on these positive results, the Company is exploring opportunities to potentially establish a partnership for DDS-08B and other products for which the INTELLITAB(TM) platform may be beneficial.

Financial Results

Three-Month Period Ended March 31, 2010

Revenue from product sales for the first quarter of fiscal 2010 was $3.2 million compared with $3.8 million for the first quarter of fiscal 2009. The decrease is the result of a $0.4 million unfavourable year-over-year variance in the Euro relative to the Canadian dollar, as a significant portion of product sales are denominated in Euros. The decrease is also the result of a $0.4 million reserve for future price adjustments associated with the sampling program of one of the Company's customers. Total revenue for the first quarter of fiscal 2010 was $4.7 million compared with $5.0 million for the first quarter of fiscal 2009.

Gross margin (as a percentage of revenue from product sales) for the first quarter of fiscal 2010 was 55% compared with 63% for the first quarter of fiscal 2009. The lower gross margin in the first quarter of fiscal 2010 is the result of the unfavourable year-over-year variance in the exchange rate and the reserve for future price adjustments as discussed above, as well as the reversal of a write down of $0.2 million in the first quarter of fiscal 2009.

Licensing revenue for the first quarter of fiscal 2010 was $0.6 million and represented a portion of licensing payments received from the Company's licensing and distribution partners for its once-daily tramadol product and twice-daily tramadol-acetaminophen formulation. Licensing revenue for the first quarter of fiscal 2009 was $1.2 million. The decrease is primarily the result of the extension of the term over which the balance of the US$20 million up-front payment received from Purdue Pharma in 2005 for RYZOLT(TM) will be recognized. Royalty revenue recorded on sales of RYZOLT(TM) for the first quarter of 2010 was $0.6 million. RYZOLT(TM) was not yet launched in the U.S. in the first quarter of 2009.

Research and development expenses, before research and development tax credits, for the first quarter of fiscal 2010 were $2.5 million compared with $4.3 million for the first quarter of fiscal 2009. The decrease was primarily the result of lower clinical trial costs in the first quarter of fiscal 2010. Research and development tax credits for the first quarter of fiscal 2010 were $0.3 million, essentially unchanged from the first quarter of fiscal 2009.

Selling, general and administrative expenses for the first quarter of fiscal 2010 were $7.3 million compared with $6.7 million for the first quarter of fiscal 2009. The increase is primarily the result of expenses in the first quarter of fiscal 2010 related to preparations for the U.S. launch of OLEPTRO(TM), which were partially offset, amongst other items, by lower accruals for the Company's share of litigation costs incurred by Purdue to enforce certain of Purdue's U.S. patents related to Labopharm's once-daily tramadol product ($0.3 million for the first quarter of 2010 compared with $0.7 million for the first quarter of 2009).

Net loss for the first quarter of fiscal 2010 was $8.3 million, or $0.13 per share, compared with $8.0 million, or $0.14 per share, for the first quarter of fiscal 2009.

Cash, cash equivalents and marketable securities at March 31, 2010 were $43.3 million compared with $24.5 million at December 31, 2009. During the first quarter of fiscal 2010, the Company completed a draw down under its standby equity distribution agreement (SEDA) and an underwritten public offering of units that, combined, generated net proceeds of approximately $23.0 million. Subsequent to quarter end, Labopharm signed an agreement with Gruppo Angelini to establish a joint venture for the commercialization of OLEPTRO(TM) in the U.S. and to license OLEPTRO(TM) to the joint venture. Upon completion of the transaction, expected by the end of May 2010, Labopharm will receive an up-front payment of US$26 million such that its cash position will increase by approximately $12 million after accounting for the Company's US$14 million contribution to initially fund its proportion of the joint venture's working capital requirements.