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Nuvo Research announces 2012 second quarter results

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MISSISSAUGA, ON, Aug. 1, 2012 /PRNewswire/ - Nuvo Research Inc. (TSX: NRI), a specialty pharmaceutical company dedicated to building a portfolio of products for the topical treatment of pain and the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the second quarter ended June 30, 2012.

Second Quarter and Recent Corporate Developments:

  • The Company received notice of a positive opinion from the European Decentralized Procedure for the approval of Pliaglis® in the E.U. from the German Federal Institute for Drugs and Medical Devices (BfArM), the reference member state;
  • The Company was advised by Galderma S.A. (Galderma) that it received marketing licenses for Pliaglis in 5 E.U. countries; the first 3 licenses entitled Nuvo to receive US$6.0 million of milestone payments;
  • Galderma submitted a response to the Complete Response Letter from the U.S. Food and Drug Administration (FDA) and has advised Nuvo that  it believes the response addresses all of the FDA's issues required for the approval of the supplemental New Drug Application (sNDA) for Pliaglis in the U.S.;
  • The Company was advised by Mallinckrodt Inc. (Mallinckrodt), the Pharmaceuticals business of Covidien, that an sNDA for Pennsaid® 2% filed with the U.S. FDA by Mallinckrodt was converted by Mallinckrodt to a New Drug Application (NDA), as per the FDA's request, and was accepted by the FDA for review with a Prescription Drug User Fee Act (PDUFA) date of March 4, 2013;
  • The United States Patent Office issued a patent relating to a method of using Pennsaid with an expiry date of July 10, 2029 which was filed in the FDA Orange Book;
  • The Company and Mallinckrodt received Paragraph IV certification notices from three companies advising that they have filed an Abbreviated New Drug Application (ANDA) with the FDA for a generic version of Pennsaid;
  • The United States Patent Office reinstated a patent related to Synera® Patch with an expiry date of July 7, 2020 which was filed in the FDA Orange Book;
  • The Development Bank of Saxony (SAB) in Germany advised Nuvo that it will provide Nuvo with up to €4.4 million of non-repayable funding for the further development of its improved reformulated version of WF10;
  • The Company entered into a license and supply agreement granting Paladin Labs, Inc. (Paladin) exclusive Canadian rights to market and sell Synera, upon regulatory approval; and
  • The Company signed a loan agreement with Paladin; whereby, Paladin has agreed to loan Nuvo $8.0 million in two equal tranches of $4.0 million.  The first tranche was advanced in late May 2012.

"2012 has been a very busy and productive time for Nuvo," said Dan Chicoine, Nuvo's Chairman and Co-Chief Executive Officer.  "We continue to move forward with our strategy of building a profitable specialty pharmaceutical company focused on the treatment of pain."

Pennsaid U.S.

According to IMS Health, during the second quarter of 2012, U.S. prescriptions of Pennsaid continued to grow quarter-over-quarter to a record of approximately 95,000 with an average 1.31 bottles of Pennsaid dispensed per script. This represents an increase of approximately 2% over the number of prescriptions in the first quarter of 2012.

In the first quarter of 2012, Endo Pharmaceuticals Holdings Inc. (Endo) indicated that there would be temporary shortages in the U.S. of its licensed product, Voltaren Gel, the main competitor product to Pennsaid, as a result of manufacturing issues unrelated to Voltaren Gel at a facility owned by Novartis Consumer Health that was supplying Voltaren Gel for the U.S. market.  Such product shortages have contributed to recent substantial increases in Pennsaid U.S. prescriptions; however, in April, Pennsaid weekly prescriptions retreated from their first quarter peak which coincides with Voltaren Gel supply resumption.

Operating Results

Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2012 increased to $11.4 million compared to $3.8 million for the three months ended June 30, 2011. The significant increase in revenue relates to $5.1 million in milestone payments earned by the Company upon the marketing approval of Pliaglis in the first two European countries and an increase in royalty and product revenue earned on Pennsaid sales in the U.S., primarily due to the Voltaren Gel temporary product shortage.  Total revenue for the six months ended June 30, 2012 was $17.6 million compared to $7.6 million for the six months ended June 30, 2011.

For the three months ended June 30, 2012, gross margin on product sales increased to $0.8 million compared to $0.5 million for the three months ended June 30, 2011.  The increase in gross margin was primarily attributable to an increase in Pennsaid product sales.  For the six months ended June 30, 2012, gross margin on product sales were $1.6 million compared to $1.5 million for the six months ended June 30, 2011.

Total operating expenses for the three and six months ended June 30, 2012 were $5.6 million and $11.9 million compared to $4.6 million and $9.2 million for the three and six months ended June 30, 2011.  The increase in operating expenses relates primarily to sales and marketing (S&M) costs for the Company's launch of Synera in the United States, targeting interventional pain physicians with a dedicated 21 person pain specialty contract sales force and the inclusion of ZARS' operating expenses.

R&D expenses were unchanged at $2.0 million for the three months ended June 30, 2012 and the three months ended June 30, 2011.  R&D expenses for the six months ended June 30, 2012 were $3.7 million compared to $4.1 million for the six months ended June 30, 2011. The decrease in R&D expenses year-over-year was attributable to the closure of the Company's San Diego research facility at the end of January 2011.

S&M expenses were $1.4 million and $3.4 million for the three and six months ended June 30, 2012 compared to $nil for the three and six months ended June 30, 2011.  S&M expenses were entirely attributable to the U.S. launch of Synera.

G&A expenses were $2.2 million for the three months ended June 30, 2012 compared to $2.6 million for the three months ended June 30, 2011.  The decrease is related to consulting, professional and other fees incurred in the comparative period related to the ZARS acquisition. G&A expenses decreased to $4.8 million for the six months ended June 30, 2012 compared to $5.2 million for the six months ended June 30, 2011.

Net income was $3.3 million and $1.2 million for the three and six months ended June 30, 2012 compared to a net loss of $0.6 million and $2.9 million for the three and six months ended June 30, 2011. The increase in income was attributable to the milestone revenue earned from Galderma and higher royalty revenue on Pennsaid sales in the U.S. partially offset by higher operating expenses.  In addition, the comparable period included a $1.8 million gain recognized on the change in terms of the contingent consideration related to the ZARS acquisition.

Cash and cash equivalents were $14.1 million as at June 30, 2012 compared to $14.7 million as at December 31, 2011.

Cash used in operating activities was $1.0 million for the three months ended June 30, 2012 compared to $4.3 million for the three months ended June 30, 2011.  The decrease related to a larger investment in non-cash working capital in the current quarter compared to the comparative period.  For the six months ended June 30, 2012, cash used in operating activities was $4.4 million for the six months ended June 30, 2012 versus $5.4 million for the six months ended June 30, 2011.

Cash provided by financing activities was $3.8 million and $3.9 million for the three and six months ended June 30, 2012 compared to cash used in financing activities of $3.0 million for both for the three and six months ended June 30, 2011.  In the quarter, the Company received loan proceeds of $4.0 million from Paladin which represents the first tranche of a $8.0 million loan.  In the comparative period, the Company paid the entire balance of acquired bank debt from the ZARS acquisition that was payable on the acquisition date.

The number of common shares outstanding as at June 30, 2012 was 565.7 million.

Management to Host Conference Call

Management will host a conference call to discuss the first quarter results on Thursday, August 2, 2012 at 8:30 a.m. ET.  Following management's presentation, there will be a question and answer session, at which time the operator will direct participants to the correct procedure for submitting questions. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please call in 15 minutes prior to the call to secure a line. You will be put on hold until the conference call begins.

A taped replay of the conference call will be available two hours after the live conference call and will be accessible until Thursday, August 9, 2012 by calling 416-849-0833 or 1-855-859-2056, reference number 89901863.

A live audio webcast of the conference call will be available through www.nuvoresearch.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to hear the webcast.

About Nuvo Research Inc.

Nuvo Research is a publicly traded, Canadian specialty pharmaceutical company, headquartered in Mississauga, Ontario.  The Company is building a portfolio of products for the treatment of pain through internal research and development and by in-licensing and acquisition.  The Company's product portfolio includes Pennsaid®, Pliaglis® and Synera®.  Pennsaid, a topical nonsteroidal anti-inflammatory drug (NSAID), is used to treat the signs and symptoms of osteoarthritis of the knee(s).  Pennsaid is sold in the United States by Mallinckrodt Inc., the Pharmaceuticals business of Covidien, in Canada by Paladin Labs Inc. and in several European countries. Pliaglis is a topical local anesthetic cream which provides topical local analgesia for superficial dermatological procedures.  The Company has licensed worldwide marketing rights to Pliaglis to Galderma Pharma S.A., a global company dedicated to dermatology.  Synera is a topical patch that combines lidocaine, tetracaine and heat, approved in the United States to provide local dermal analgesia for superficial venous access and superficial dermatological procedures and in Europe, for surface anaesthesia of normal intact skin.  Nuvo currently markets Synera in the United States and its licensing partner, EuroCept International B.V., has initiated a pan-European launch of Synera (under the name Rapydan®) in several European countries.  The Company is also developing the compound WF10, for the treatment of immune related diseases.

Forward-Looking Statements
This document contains forward-looking statements. Some forward-looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "indicates" or similar expressions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Nuvo considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but caution that these assumptions regarding future events, many of which are beyond the control of the Company, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the Annual Report, as well as in Nuvo's Annual Information Form for the year ended December 31, 2011.  Nuvo disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information or future events, except as required by law. For additional information on risks and uncertainties relating to these forward looking statements, investors should consult the Company's ongoing quarterly filings, annual report and Annual Information Form and other filings found on SEDAR at www.sedar.com.

NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

Unaudited   As at June 30,
2012
As at December 31,
2011
(Canadian dollars in thousands)   $ $
ASSETS      
CURRENT      
Cash and cash equivalents   14,096 14,724
Accounts receivable   9,300 3,700
Inventories   1,690 1,844
Other current assets   879 1,307
TOTAL CURRENT ASSETS   25,965 21,575
       
Property, plant and equipment   1,712 1,960
Intangible assets   16,737 16,821
Goodwill   4,503 4,498
TOTAL ASSETS   48,917 44,854
       
LIABILITIES AND EQUITY      
CURRENT      
Accounts payable and accrued liabilities   4,849 5,208
Current portion of deferred revenue   636 1,494
Current portion of finance lease and other obligations   2,521 55
TOTAL CURRENT LIABILITIES   8,006 6,757
Deferred revenue   313 398
Finance lease obligations and other obligations   1,953 489
TOTAL LIABILITIES   10,187 7,644
       
EQUITY      
Common shares   228,469 228,306
Contributed surplus   16,539 16,405
Accumulated other comprehensive income   962 964
Deficit   (207,240) (208,465)
TOTAL EQUITY   38,730 37,210
TOTAL LIABILITIES AND EQUITY   48,917 44,854

NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)  
Unaudited   Three Months Ended
June 30,
Six Months Ended
June 30,
    2012 2011 2012 2011
(Canadian dollars in thousands,
except per share and share figures)
  $ $ $ $
REVENUE          
Product sales   3,040 1,998 5,769 4,579
Cost of goods sold   2,197 1,461 4,178 3,078
Gross margin on product sales   843 537 1,591 1,501
           
Other revenue          
Royalties   2,723 1,263 5,650 2,383
Licensing fees   5,532 423 6,068 508
Research and other contract revenue   62 77 99 116
    9,160 2,300 13,408 4,508
OPERATING EXPENSES          
Research and development   1,961 2,027 3,657 4,126
Sales and marketing expenses   1,392 - 3,394 -
General and administrative expenses   2,213 2,637 4,806 5,154
Interest expense   80 1 100 2
Interest income   (5) (45) (10) (99)
    5,641 4,620 11,947 9,183
OTHER INCOME          
Gain on ZARS contingent consideration   - (1,770) - (1,770)
Foreign currency loss (gain)   127 (14) 110 (26)
Net income (loss) before income taxes   3,392 (536) 1,351 (2,879)
Income taxes   60 22 126 44
NET INCOME (LOSS)   3,332 (558) 1,225 (2,923)
Other comprehensive income (loss)          
Unrealized gains (losses) on translation of foreign operations   520 (19) (2) 18
TOTAL COMPREHENSIVE INCOME (LOSS)   3,852 (577) 1,223 (2,905)
           
Net income (loss) attributable to:          
Owners of the parent   3,332 (112) 1,225 (2,346)
Non-controlling interest   - (446) - (577)
    3,332 (558) 1,225 (2,923)
Total comprehensive income (loss) attributable to:          
Owners of the parent   3,852 (100) 1,223 (2,237)
Non-controlling interest   - (477) - (668)
    3,852 (577) 1,223 (2,905)
Net income (loss) per common share - basic and diluted   $0.006 $(0.001) $0.002 $(0.007)
Average number of common shares outstanding          
  (in millions)            
  basic   565.7 472.5 565.5 445.6
  diluted   568.7 472.5 567.9 445.6

NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Unaudited   Three months ended
June 30
Six months ended
June 30
    2012 2011 2012 2011
(Canadian dollars in thousands)   $ $ $ $
OPERATING ACTIVITIES          
Net income (loss)   3,332 (558) 1,225 (2,923)
Items not involving current cash flows:          
  Gain on ZARS contingent consideration   - (1,770) - (1,770)
  Depreciation and amortization   163 163 363 316
  Deferred license revenue recognized   (386) (423) (922) (508)
  Deferred royalty revenue, net of royalties earned   (239) (95) (98) (168)
  Stock-based compensation   130 23 489 195
  Unrealized foreign exchange   108 (70) (21) (57)
  Interest and accretion of long-term other obligations   78 - 97 -
  Other   (4) 9 16 9
    3,182 (2,721) 1,149 (4,906)
Net change in non-cash working capital   (4,136) (1,617) (5,572) (518)
CASH USED IN OPERATING ACTIVITIES   (954) (4,338) (4,423) (5,424)
INVESTING ACTIVITIES          
Acquisition of ZARS Pharma Inc.   - 1,477 - 1,477
Acquisition of property, plant and equipment   (8) (47) (15) (80)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES   (8) 1,430 (15) 1,397
FINANCING ACTIVITIES          
Proceeds from other obligations   4,000 - 4,000 -
Repayment of other obligations   (155) (3,022) (168) (3,022)
Issuance of common shares   - - 22 29
Repayments of finance lease obligations   (1) (1) (1) (61)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   3,844 (3,023) 3,853 (3,054)
Effect of exchange rate changes on cash and cash equivalents   (45) 41 (43) 37
Net change in cash and cash equivalents during the period   2,837 (5,890) (628) (7,044)
Cash and cash equivalents, beginning of period   11,259 27,115 14,724 28,269
CASH AND CASH EQUIVALENTS, END OF PERIOD   14,096 21,225 14,096 21,225
           
Interest paid   - 1 - 3
Interest received   4 47 15 99
Income taxes paid   69 20 106 42

 

 

 

SOURCE Nuvo Research Inc.



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