UPDATE 1-Labopharm, Grunenthal sign European tramadol pact

*Grunenthal to market, sell pain formula in Europe

*Labopharm to receive 3.5 million euros

*Labopharm responsible for obtaining regulatory approval

TORONTO, Oct 8 (Reuters) - Canadian drugmaker Labopharm Inc DDS.TO said on Thursday that it struck a European supply and distribution agreement with Germany's Grunenthal GmbH for Labopharm's twice-daily tramadol acetaminophen pain treatment.

Grunenthal has the exclusive right to market and sell the formula in a number of European countries. Labopharm will supply Grunenthal with unpackaged tablets and will receive a fixed transfer price.

Labopharm will receive 3.5 million Euros ($5.2 million) up front and up to 4 million euros in milestone payments on certain regulatory and product reimbursement approvals prior to the launch of the product.

Labopharm is also responsible for obtaining regulatory approval in most of the countries covered by the agreement. ($1=$1.06 Canadian) (Reporting by Scott Anderson, editing by Dave Zimmerman)