Nuvo Research announces 2013 First Quarter Results

MISSISSAUGA, ON, May 1, 2013 /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 first quarter ended March 31, 2013.

First Quarter and Recent Corporate Developments:

  • Commercial sale of Pliaglis® commenced in the U.S. in March  and in the E.U. in April  by Galderma Pharma, S.A. (Galderma), the Company's global marketing partner, creating a new source of royalty revenue

  • A Complete Response Letter was received from the U.S. Food and Drug Administration (FDA) by Mallinckrodt Inc. (Mallinckrodt), the Pharmaceuticals business of Covidien, the Company's U.S. marketing partner for Pennsaid and Pennsaid® 2% requiring that Mallinckrodt successfully complete a pharmacokinetic study comparing Pennsaid 2% to the original Pennsaid. The study has been commenced and Mallinckrodt has indicated that it expects to submit the results to the FDA in Q3 2013 which could lead to FDA approval of Pennsaid 2% in Q1 2014.

Pennsaid U.S.
According to IMS Health, a provider of dispensed prescription data, during the first quarter of 2013, U.S. prescriptions of Pennsaid were 43,000 with an average 1.33 bottles of Pennsaid dispensed per script.  This represents a decrease of approximately 16% from the fourth quarter of 2012.

Operating Results
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended March 31, 2013 was $2.3 million compared to $6.2 million for the three months ended March 31, 2012.  The decrease was attributable to a significant decrease in Pennsaid royalty revenue and product sales in the U.S. as the prior year revenue included significant shipments to the U.S. due to the temporary shortage of Voltaren Gel.  Sales of Synera® were consistent at $0.3 million versus the comparative period.

For the three months ended March 31, 2013, the Company reported a negative gross margin on product sales of $368,000 compared to a positive gross margin of $748,000 for the comparable quarter in 2012.  The decrease in gross margin was related to significantly lower Pennsaid product sales.

Total operating expenses for the three months ended March 31, 2013 were $4.4 million compared to $6.3 million for the three months ended March 31, 2012.  The decrease in operating expenses was primarily due to lower sales and marketing (S&M) costs.

Research and development (R&D) expenses increased to $1.9 million for the three months ended March 31, 2013 compared to $1.7 million for the three months ended March 31, 2012.  In the quarter, the Company reduced its operating costs in the Pain Group by closing its office in Salt Lake City which was the former ZARS head office resulting in termination costs of $0.4 million.

S&M expenses were $0.2 million for the three months ended March 31, 2013 compared with $2.0 million for the comparable period in 2012.  The S&M expense reduction relates to the Company's higher U.S. marketing costs for Synera in the comparative period during which the Company launched Synera in the U.S., targeting interventional pain physicians using a contract sales organization (CSO).  In August 2012, the Company refocused its internal resources on large national accounts such as dialysis centers, infusion centers and blood diagnostic laboratories and terminated its agreement with the CSO.

General and administrative (G&A) expenses decreased to $2.3 million for the three months ended March 31, 2013 compared to $2.6 million for the three months ended March 31, 2012. The decrease in G&A expenses was related to a decrease in the value of the deferred stock units and a refund related to the Company's insurance portfolio, partially offset by increased amortization expense on intangible assets.

Net loss for the three months ended March 31, 2013 was $3.3 million versus $4.4 million for the three months ended March 31, 2012.  The decreased loss was substantially a result of lower operating and other expenses partially offset by a decrease in revenue.

Cash and cash equivalents were $10.0 million as at March 31, 2013 compared to $12.1 million as at December 31, 2012.

Cash used in operating activities for the three months ending March 31, 2013 was $1.7 million compared to $3.5 million for the three months ended March 31, 2012.  This improvement was due to a recovery in non-cash working capital primarily related to the receipt of the US$1.0 million milestone payment from Galderma.

Net cash used in financing activities totaled $381,000 for the three months ended March 31, 2013 compared to net cash provided by financing activities of $9,000 for the three months ended March 31, 2012.  During the first quarter, the cash was used entirely for repayments of the Company's finance lease and other obligations.

The number of common shares outstanding as at March 31, 2013 was 568.5 million.

Management to Host Conference Call
Management will host a conference call to discuss the first quarter results on Thursday, May 2, 2013 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 May 9, 2013 by calling 416-849-0833 or 1-855-859-2056, reference number 35119047.

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.  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., a Covidien company, 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 pharmaceutical company specialized in 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 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 Consolidated Financial Statements, Management's Discussion & Analysis, as well as in Nuvo's Annual Information Form for the year ended December 31, 2012.  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 March 31,
2013
    As at December 31,
2012
(Canadian dollars in thousands)   $     $
ASSETS          
CURRENT          
Cash and cash equivalents   9,992     12,149
Accounts receivable   2,359     3,771
Inventories   1,174     1,156
Other current assets   917     1,056
TOTAL CURRENT ASSETS   14,442     18,132
           
Property, plant and equipment   1,539     1,614
Intangible assets   8,789     8,739
TOTAL ASSETS   24,770     28,485
           
LIABILITIES AND EQUITY          
CURRENT          
Accounts payable and accrued liabilities   2,954     3,360
Current portion of deferred revenue   313     341
Current portion of finance lease and other obligations   1,982     1,900
TOTAL CURRENT LIABILITIES   5,249     5,601
Deferred revenue   -     57
Finance lease and other obligations   921     1,358
TOTAL LIABILITIES   6,170     7,016
           
EQUITY          
Common shares   228,772     228,705
Contributed surplus   13,511     13,495
Accumulated other comprehensive income   738     420
Deficit   (224,421)     (221,151)
TOTAL EQUITY   18,600     21,469
TOTAL LIABILITIES AND EQUITY   24,770     28,485
           

NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
 
Unaudited   Three Months Ended
March 31, 2013
    Three Months Ended
March 31, 2012
(restated)
(Canadian dollars in thousands, except per share and share figures)   $     $
REVENUE          
Product sales   604     2,729
Cost of goods sold   972     1,981
Gross margin on product sales   (368)     748
           
Other revenue          
Royalties   1,384     2,927
Licensing fees   85     536
Research and other contract revenue   178     37
    1,279     4,248
OPERATING EXPENSES          
Research and development expenses   1,872     1,696
Sales and marketing expenses   177     2,002
General and administrative expenses   2,293     2,593
Interest expense   112     20
Interest income   (10)     (5)
    4,444     6,306
OTHER EXPENSES (INCOME)          
Loss on ZARS contingent consideration   -     2,300
Foreign currency loss (gain)   77     (17)
Net loss before income taxes   (3,242)     (4,341)
Income taxes   28     66
NET LOSS   (3,270)     (4,407)
Other comprehensive income (loss)          
Unrealized gains (losses) on translation of foreign operations   318     (522)
TOTAL COMPREHENSIVE LOSS   (2,952)     (4,929)
           
Net loss per common share - basic and diluted   $(0.006)     $(0.008)
Average number of common shares          
  outstanding (in millions)          
             
  Basic and diluted   568.5     568.1
             

NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
           
Unaudited   Three Months Ended
March 31, 2013
    Three Months Ended
March 31, 2012
(restated)
(Canadian dollars in thousands)   $     $
OPERATING ACTIVITIES          
             
Net loss   (3,270)     (4,407)
Items not involving current cash flows:          
  Loss on ZARS contingent consideration   -     2,300
  Depreciation and amortization   248     200
  Deferred license revenue recognized   (85)     (536)
  Deferred royalty revenue, net of royalties earned   -     141
  Stock-based compensation   140     359
  Unrealized foreign exchange (gain) loss   148     (129)
  Interest and accretion of long-term other obligations   17     19
  Other   (5)     20
    (2,807)     (2,033)
Net change in non-cash working capital   1,085     (1,436)
CASH USED IN OPERATING ACTIVITIES  
(1,722)     (3,469)
INVESTING ACTIVITIES          
Acquisition of property, plant and equipment   (35)     (7)
CASH USED IN INVESTING ACTIVITIES   (35)     (7)
FINANCING ACTIVITIES          
Repayment of other obligations   (381)     (13)
Issuance of common shares   -     22
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   (381)     9
Effect of exchange rate changes on cash and cash equivalents   (19)     2
Net change in cash and cash equivalents during the period   (2,157)     (3,465)
Cash and cash equivalents, beginning of the period   12,149     14,724
CASH AND CASH EQUIVALENTS, END OF THE PERIOD   9,992     11,259
           
Interest paid   100     -
Interest received   5     11
Income taxes paid   20     37

 

SOURCE Nuvo Research Inc.



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