Nuvo Research announces 2013 fourth quarter & year-end results

MISSISSAUGA, ON, Feb. 20, 2014 /PRNewswire/ - Nuvo Research Inc. (TSX: NRI), a specialty pharmaceutical company with a diverse portfolio of topical and immunology products, today announced its financial and operational results for the fourth quarter and year ended December 31, 2013.

"In 2013 and early 2014, we significantly advanced our three FDA approved commercial products that will contribute to Nuvo revenues.  Pennsaid 2% was approved and launched in the U.S., Pliaglis was launched in the E.U. and the U.S. and approved in Brazil and we licensed Synera for the U.S. market," said Dan Chicoine, Nuvo's Chairman and Co-CEO.  "We believe our immunotherapy drug WF10 will provide relief to the millions of U.S. allergy sufferers with moderate to severe symptoms and we will be commencing a confirmatory Phase 2 study with results expected in Q4 2014.  Also, throughout 2014, we will seek additional global and regional out-licensing partners who have the capability to commercialize our broad pipeline of topical products and technologies."

2013 and Recent Corporate Developments:

Pennsaid and Pennsaid 2%

  • The U.S. Food and Drug Administration (FDA) approved the marketing of Pennsaid 2% in the U.S. on January 16, 2014 and it was launched by our U.S licensee on February 10, 2014;
  • The Company entered into a supply and distribution agreement with NovaMedica LLC providing it with the exclusive rights to market Pennsaid and Pennsaid 2% in Russia and some of the Community of Independent States; and
  • The Company commenced legal action against Mallinckrodt, Inc. (Mallinckrodt) seeking not less than US$100M damages and a declaration that it is entitled to terminate Mallinckrodt's license rights which would result in the U.S. rights to market Pennsaid and Pennsaid 2% reverting to the Company.

Pliaglis

  • Galderma Pharma S.A. (Galderma), the Company's global Pliaglis marketing partner, initiated its commercial sale of Pliaglis in the E.U. and U.S.; and
  • Galderma received marketing approval in Brazil which entitles the Company to a US$2.0 million milestone payment.

Synera

  • The Company out-licensed the U.S. Synera rights to Galen for a US$4.5M upfront payment and royalties and potential milestone payments.

WF10

  • The U.S. Patent Office granted a U.S. Patent for the treatment of allergic rhinitis and allergic asthma with WF10; and
  • The Company announced plans to commence a confirmatory Phase 2 study in Germany for the treatment of allergic rhinitis with WF10, with study results anticipated in Q4 2014.

Capital Markets

  • The Company completed a share consolidation reducing the number of its issued and outstanding common shares to approximately 8.8 million; and
  • The Company amended its loan agreement with Paladin Labs Inc. and drew an additional $4.0 million of debt financing.

Financial Results
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended December 31, 2013 was $3.7 million compared to $3.6 million for the three months ended December 31, 2012.  This slight increase was attributable to a $0.4 million increase in royalty revenue from Pennsaid in the U.S. and an increase in licensing fees, partially offset by lower product sales in the quarter.  Total revenue for the year was $18.4 million compared to $24.7 million for the year ended December 31, 2012.

The Company reported a gross margin on product sales of $0.2 million for the three months ended December 31, 2013 compared to $0.4 million for the three months ended December 31, 2012.  The decrease in gross margin on product sales was attributable to lower product sales.  For the year, the Company reported a negative gross margin on product sales of $0.3 million compared to positive gross margin of $1.6 million in 2012.

Total operating expenses for the three months ended December 31, 2013 were $4.6 million compared to $4.0 million for the three months ended December 31, 2012.  The increase in operating expenses was primarily due to termination costs incurred in the quarter partially offset by cost savings realized from the closure of the Company's office in Salt Lake City the first quarter of 2013. Total operating expenses for the year ended December 31, 2013 were $17.7 million compared to $21.2 million for the year ended December 31, 2012.

Research and development (R&D) expenses increased to $1.9 million for the three months ended December 31, 2013 compared to $1.5 million for the three months ended December 31, 2012.  The increase in the quarter primarily related to increased spending on WF10 drug development programs and termination costs.  R&D expenses were $7.0 million for the year ended December 31, 2013 compared to $6.8 million for the year ended December 31, 2012.

S&M expenses were $nil for the three months ended December 31, 2013 compared to $0.3 million for the comparative period in 2012.  S&M expenses relate entirely to the Company's marketing costs for Synera in the U.S. The Company terminated its S&M efforts subsequent to the sale of Synera to Galen in the third quarter of 2013.

General and administrative (G&A) expenses were $2.5 million for the three months ended December 31, 2013 compared to $2.1 million for the three months ended December 31, 2012.  The increase in the quarter primarily related to termination costs.  G&A expenses increased to $9.5 million for year ended December 31, 2013 compared to $9.1 million for the year ended December 31, 2012.

Net loss for the three months ended December 31, 2013 was $1.9 million compared to $11.2 million for the three months ended December 31, 2012.  The decreased loss was a result of significant transactions in the 2012 comparative period including the impairment charge on intangible assets and goodwill, partially offset by the increased gain on the ZARS Contingent Consideration. Net loss for the year ended December 31, 2013 was $10.4 million compared to $13.6 million for the year ended December 31, 2012.

Cash and cash equivalents were $12.6 million as at December 31, 2013 compared to $12.1 million as at December 31, 2012.  The US$2.0 million milestone payment for Pliaglis is not due from Galderma until the first quarter of 2014.

Cash used in operating activities for the three months ended December 31, 2013 was $1.7 million compared to cash provided by operating activities of $1.0 million for the three months ended December 31, 2012.  The increase in cash used in operating activities related to a significant recovery of non-cash working capital in the comparative period from the receipt of the US$5.0 million ($5.1 million) milestone payment from Galderma.  Cash used in operating activities was $1.7 million for the year ended December 31, 2013 compared to $5.1 million for the year ended December 31, 2012.

Net cash used in financing activities totaled $0.5 million for the three months ended December 31, 2013 compared to $0.4 million for the three months ended December 31, 2012.  During both periods, the Company made repayments on finance and other obligations.  Net cash provided by financing activities totaled $2.2 million for the year ended December 31, 2013 compared to $2.7 million for the year ended December 31, 2012.

The number of common shares outstanding as at December 31, 2013 was 8,849,619.

Pennsaid U.S.
According to IMS Health, a provider of dispensed prescription data, during the fourth quarter of 2013, U.S. prescriptions of Pennsaid were 31,000 with an average 1.29 bottles of Pennsaid dispensed per script.  This represents a decrease of approximately 9% over the number of prescriptions in the third quarter of 2013.  For the year, approximately 144,000 Pennsaid prescriptions were dispensed, a decrease of 51% over 2012 and for each prescription, approximately 1.31 bottles of Pennsaid were dispensed.

About Nuvo Research Inc.
Nuvo (TSX:NRI) is a specialty pharmaceutical company focused on improving patient's lives by developing and commercializing innovative products that address unmet medical needs.  The Company has a diverse portfolio of products in the areas of topical pain and immunology.

Nuvo's marketed products include Pennsaid (a topical treatment for the signs and symptoms of osteoarthritis of the knee), Pennsaid 2% (a topical treatment for the pain of osteoarthritis of the knee), Pliaglis (a topical local anesthetic) and the heated lidocaine/tetracaine patch (HLT Patch).  For additional Company information visit www.nuvoresearch.com.

Forward-Looking Statements
Certain statements in this news release constitute forward-looking statements within the meaning of applicable securities laws.  Forward-looking statements include, but are not limited to, statements concerning the Company's future objectives, strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events.  Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.  Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements.  Factors that could cause such differences include the need for additional financing, the current economic environment, dependence on sales and marketing partnerships, competitive developments, as well as other risk factors included in the Company's Annual Information Form dated February 20, 2014 under the heading "Risks Factors" and as described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions.  This list is not exhaustive of the factors that may impact the Company's forward-looking statements.  These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements.  As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements.  The factors underlying current expectations are dynamic and subject to change.  Although the forward-looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements.  Certain statements included in this news release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this news release.  All forward-looking statements in this news release are qualified by these cautionary statements.  The forward-looking statements contained herein are made as of the date of this news release and except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
       
    As at December 31,
2013
As at December 31,
2012
(Canadian dollars in thousands)   $ $
ASSETS      
CURRENT      
Cash and cash equivalents   12,621 12,149
Accounts receivable   4,189 3,771
Inventories   990 1,156
Other current assets   541 1,056
TOTAL CURRENT ASSETS   18,341 18,132
       
Property, plant and equipment   1,411 1,614
Intangible assets   1,869 8,739
TOTAL ASSETS   21,621 28,485
       
LIABILITIES AND EQUITY      
CURRENT      
Accounts payable and accrued liabilities   3,925 3,360
Current portion of finance lease and other obligations   2,114 1,900
Current portion of deferred revenue   57 341
TOTAL CURRENT LIABILITIES   6,096 5,601
Finance lease and other obligations   3,327 1,358
Deferred revenue   - 57
TOTAL LIABILITIES   9,423 7,016
       
EQUITY      
Common shares   229,068 228,705
Contributed surplus   13,573 13,495
Accumulated other comprehensive income   1,086 420
Deficit   (231,529) (221,151)
TOTAL EQUITY   12,198 21,469
TOTAL LIABILITIES AND EQUITY   21,621 28,485

 

NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS  
 
    Three Months Ended
December 31,
Twelve Months Ended
December 31,
    2013 2012 2013 2012
(Canadian dollars in thousands, except per share and share figures)   $ $ $ $
REVENUE          
Product sales   1,327 2,155 4,432 8,936
Cost of goods sold   1,175 1,770 4,769 7,275
Gross margin   152 385 (337) 1,661
           
Other revenue          
Royalties   1,761 1,278 6,098 8,284
Licensing fees   609 85 7,607 7,252
Research and other contract revenue   4 46 272 178
Net revenue   2,526 1,794 13,640 17,375
OPERATING EXPENSES          
Research and development expenses   1,899 1,539 7,027 6,849
Sales and marketing expenses   - 290 649 4,892
General and administrative expenses   2,497 2,084 9,467 9,123
Interest expense   218 131 649 381
Interest income   (28) (1) (78) (16)
Total operating expenses   4,586 4,043 17,714 21,229
OTHER EXPENSES (INCOME)          
Impairment of intangible assets and goodwill   - 11,868 6,358 11,868
Litigation settlement   - - - (277)
Loss (gain) on disposal of property, plant and equipment   10 (2) 10 (2)
Gain on ZARS contingent consideration   - (2,760) - (2,300)
Foreign currency loss (gain)   (161) (205) (181) 224
Net loss before income taxes   (1,909) (11,150) (10,261) (13,367)
Income taxes   33 22 117 196
NET LOSS   (1,942) (11,172) (10,378) (13,563)
Other comprehensive income (loss) to be reclassified to net income (loss) in subsequent periods          
Unrealized gains (losses) on translation of foreign operations   137 244 666 (544)
TOTAL COMPREHENSIVE LOSS   (1,805) (10,928) (9,712) (14,107)
Net loss per common share -          
   Basic and diluted   $(0.22) $(1.27) $(1.18) $(1.54)
Average number of common shares outstanding
   (in thousands)
         
   basic and diluted   8,812 8,794 8,808 8,792

 

NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    Three months ended
December 31
Twelve months ended
December 31
    2013 2012 2013 2012
(Canadian dollars in thousands)   $ $ $ $
OPERATING ACTIVITIES          
Net loss   (1,942) (11,172) (10,378) (13,563)
Items not involving current cash flows:          
  Impairment of intangible assets and goodwill   - 11,868 6,358 11,868
  Gain on ZARS contingent consideration   - (2,760) - (2,300)
  Depreciation and amortization   185 157 1,338 674
  Deferred license revenue recognized   (85) (85) (341) (1,092)
  Deferred royalty revenue, net of royalties earned   - (69) - (385)
  Stock-based compensation   302 158 631 734
  Unrealized foreign exchange loss (gain)   (151) (182) (126) 133
  Inventory write-downs   24 123 44 123
  Loss (gain) on disposal of property, plant and equipment   10 (2) 10 (2)
  Interest and accretion of long-term other obligations   20 17 68 72
  Other   (3) (3) (16) 11
    (1,640) (1,950) (2,412) (3,727)
Net change in non-cash working capital   (14) 2,997 677 (1,348)
CASH PROVIDED (USED) IN OPERATING ACTIVITIES   (1,654) 1,047 (1,735) (5,075)
INVESTING ACTIVITIES          
Acquisition of property, Plant and equipment   (40) (111) (229) (149)
Proceeds on disposal of property, plant and equipment   - - - 8
CASH USED IN INVESTING ACTIVITIES   (40) (111) (229) (141)
FINANCING ACTIVITIES          
Proceeds from other obligations   - - 4,000 4,000
Repayment of finance lease and other obligations   (536) (486) (1,882) (1,347)
Issuance of common shares   77 39 77 61
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   (459) (447) 2,195 2,714
Effect of exchange rate changes on cash and cash equivalents   128 170 241 (73)
Net change in cash and cash equivalents during the period   (2,025) 659 472 (2,575)
Cash and cash equivalents, beginning of period   14,646 11,490 12,149 14,724
CASH AND CASH EQUIVALENTS, END OF PERIOD   12,621 12,149 12,621 12,149
           
Interest paid   204 117 551 269
Interest received   29 - 69 21
Income taxes paid   28 22 105 182

SOURCE Nuvo Research Inc.



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