Labopharm Inc has entered into a standby equity distribution agreement (SEDA) with YA Global Master SPV Ltd, a fund managed by Yorkville Advisors, LLC. Under the terms of the agreement, YA has committed to provide up to US$ 25 million of capital during the next three years, at Labopharm's discretion, through the purchase of newly issued Labopharm common shares.

"With a number of potential cash-generating milestones on the horizon, a standby equity facility is well suited to our company at this time," said James R Howard-Tripp, president and chief executive officer, Labopharm Inc. "Should we choose to access it, the facility provides a flexible, low cost source of capital in an amount and at the time of our choosing, with a built-in minimum price."

The company can draw on YA's commitment by sending draw down notices from time to time. Each draw down notice is subject to a maximum amount of US$ 2 million, as well as a minimum price, below which the company will not issue shares to YA. Subject to the applicable minimum price, the common shares will be issued at a predetermined discount, up to a maximum of 5 per cent, to the prevailing share price. Individual draw downs cannot exceed the number of shares that would represent more than 5 per cent of the market capitalization of the company or the number of shares that would cause YA and its affiliates to own more than 9.9 per cent of the issued and outstanding shares of the company. The maximum number of shares that the company can issue under the agreement is limited to the lower of 11,426,533 common shares and 19.9 per cent of the common shares issued and outstanding at any given time.

The agreement remains subject to certain conditions precedent, including the filing of a shelf prospectus with Canadian and US securities authorities. The agreement can be terminated at any time by the company without the payment of any additional fees.

In connection with the SEDA, the company will file a preliminary short-form base shelf prospectus with the securities authorities in each province and territory of Canada and a corresponding registration statement with the United States Securities and Exchange Commission. These filings, when made final or effective, will allow the company to qualify the shares issued under the SEDA and make offerings of common shares, preferred shares, warrants or combination thereof for an amount of up to US$ 100 million during the next 25 months.

Yorkville Advisors, LLC was founded in 2001 by Mark Angelo and specialises in providing flexible, innovative debt and equity investments and financing to publicly listed companies worldwide in a variety of sectors including healthcare, energy, mining, technology media & telecommunication (TMT), and shipping.

Labopharm is an emerging leader in optimizing the performance of existing small molecule drugs using its proprietary controlled-release technologies.