Nuvo Research® Announces 2014 Third Quarter Results

MISSISSAUGA, ON, Nov. 10, 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 third quarter ended September 30, 2014.

Third Quarter and Recent Corporate Developments: 

Pennsaid^® 2%

• In September 2014, the Company reached a full settlement with Mallinckrodt Inc. (Mallinckrodt) of the Company's claims and Mallinckrodt's counterclaim relating to Mallinckrodt's license from the Company of rights to market and sell Pennsaid and Pennsaid 2% in the U.S. Under the terms of the settlement, Mallinckrodt will return all U.S. Pennsaid and Pennsaid 2% rights to the Company or its designee and has paid the Company US$10 million;
• In October 2014, the Company sold its Pennsaid 2% U.S. rights to Horizon Pharma plc (Horizon) for US$45 million. Mallinckrodt will continue to sell Pennsaid and Pennsaid 2% in the U.S. until December 31, 2014, after which Horizon will begin selling Pennsaid 2%. The Company will manufacture Pennsaid 2% for Horizon pursuant to a long-term supply agreement; and
• On November 3, 2014, the Company announced its plans to conduct a Phase 3 clinical study in Germany of Pennsaid 2% for the treatment of acute pain to support regulatory approval applications for Pennsaid 2% in international jurisdictions. Commencement of the study, which is subject to German regulatory approval, is expected in Q2 2015 with top-line results expected Q4 2015.

WF10™

• The Company has fully enrolled 183 patients in its ongoing Phase 2 WF10 clinical trial for the treatment of allergic rhinitis.  It expects the trial to be completed by the end of 2014 with top-line results available in the first quarter of 2015.

Paladin Loan Repayment

• On October 16, 2014, the Company paid $3.7 million to Paladin Labs Inc. (Paladin) in full repayment of its outstanding loan.  All related obligations of the Company have been satisfied and all security in support of the loan has been discharged.

Table of Selected Financial Results
For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Consolidated Interim Financial Statements which are available on the Company's website (www.nuvoresearch.com).

Q3 Financial Highlights
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended September 30, 2014 was $3.0 million compared to $9.1 million for the three months ended September 30, 2013.  In the quarter, product sales and royalty revenue increased by $0.6 million to $2.9 million versus the comparative period.  The decrease in total revenue in the period related to $6.8 million in license fee revenue in the comparative period related to the US$4.5 million Galen Upfront Payment from the sale of Synera for the U.S. market and the US$2.0 million milestone payment related to the marketing approval for Pliaglis in Brazil. Total revenue for the nine months ended September 30, 2014 was $9.6 million compared to $14.7 million in the comparative period.

Total operating expenses for the three months ended September 30, 2014 increased to $6.7 million from $5.7 million for the three months ended September 30, 2013.  The increase was primarily due to higher general and administrative (G&A) costs in the quarter.  Total operating expenses for the nine months ended September 30, 2014 increased to $18.4 million from $16.7 million in the comparative period. 

Cost of goods sold (COGS) for the three months ended September 30, 2014 was $1.2 million compared to $1.1 million for the three months ended September 30, 2013.  In the three-month period, the slight increase in COGS was associated with increased Pennsaid and Pennsaid 2% product sales.  The increase in product sales improved the gross margin on product sales to $0.3 million for the three months ended September 30, 2014 compared to a negative margin of $0.3 million for the three months ended September 30, 2013.  For the quarter and year-to-date, the gross margin as a percentage of product sales was 19%.  For the nine months ended September 30, 2014, COGS increased to $3.9 million compared to $3.6 million for the nine months ended September 30, 2013.

Research and development (R&D) expenses were $1.9 million for the three months ended September 30, 2014 compared to $1.7 million for the three months ended September 30, 2013.  In the quarter, the costs associated with the Company's Phase 2 clinical trial for WF10 were slightly offset by the savings realized from the closure of the Company's facility in Salt Lake City and the Topical Products and Technology (TPT) Group office in 2013.  For the nine months ended September 30, 2014, R&D expenses increased to $5.3 million compared to $5.1 million for the nine months ended September 30, 2013.

G&A expenses were $3.5 million for the three months ended September 30, 2014 compared to $2.3 million for the three months ended September 30, 2013.  The increase was primarily related to stock-based compensation which increased by $1.4 million in the three-month period, partially offsetting this was a decrease in non-cash charges related to amortization of the Company's intangible assets.  For the nine months ended September 30, 2014, G&A expenses increased to $8.7 million compared to $7.0 million for the nine months ended September 30, 2013.

Other income was $53.4 million for the three months ended September 30, 2014 compared to other expenses of $6.4 million for the three months ended September 30, 2013.  In the three month period, the Company reached a full settlement with Mallinckrodt of Nuvo's claims and Mallinckrodt's counterclaim for US$10 million in cash and the return all U.S. rights to Pennsaid and Pennsaid 2% (Pennsaid Rights).  The total gain on the litigation settlement for the three months ended September 30, 2014 was $52.3 million which includes the net cash settlement payment of $8.8 million and the non-cash portion related to the value of the Pennsaid Rights of $43.5 million, net of legal expenses and direct costs to sell.  Other income was $53.5 million for the nine months ended September 30, 2014 compared to other expenses of $6.3 million for the nine months ended September 30, 2013.  

Cash and cash equivalents were $9.7 million as at September 30, 2014, compared to $12.6 million as at December 31, 2013.  Subsequent to the quarter, the Company received US$10 million from its litigation settlement with Mallinckrodt and US$45 million from the Pennsaid 2% U.S. asset sale.  After the payment of fees related to the litigation and asset sale and the payment of the Paladin loan, the Company has approximately $60 million in cash as at November 10, 2014.

Cash provided by operations was $5.3 million for the three months ended September 30, 2014 compared to $3.9 million for the three months ended September 30, 2013.  The increase in cash provided by operations related to the increase in net income that was partially offset by the change in non-cash items.  The significant increase in net income relates to the $52.3 million gain on the litigation settlement, of which $43.5 million was a non-cash item.  Cash provided by operations was $0.7 million for the nine months ended September 30, 2014 compared to cash used in operation of $0.9 million for the nine months ended September 30, 2013. 

Cash provided by financing activities totaled $33,000 for the three months ended September 30, 2014 compared to $3.5 million for the three months ended September 30, 2013.  In the current three-month period, the Company received $0.5 million from the exercise of 165,000 warrants at $3.00 per unit offset by payments towards the Company's loan.  Cash provided by financing activities was $1.8 million for the nine months ended September 30, 2014 compared to $2.7 million for the nine months ended September 30, 2013. 

The number of common shares outstanding as at September 30, 2014 was 10,405,619.

About Nuvo Research Inc.
Nuvo (TSX:NRI) is a specialty pharmaceutical company with a diverse portfolio of products and technologies.  The Company operates two distinct business units: the Topical Products and Technology (TPT) Group and the Immunology Group.  The TPT Group has four U.S. Food and Drug Administration (FDA) approved commercial products, a pipeline of topical and transdermal products focusing on pain and dermatology and four drug delivery platforms that support the development of patented formulations that can deliver actives into or through the skin.  The Immunology Group has two commercial products, a development program for the treatment of allergic rhinitis and an immune system modulation platform that has the potential to support treatments for a broad range of immune system related disorders.  For additional company information visit www.nuvoresearch.com.

Forward-Looking Statements
Certain statements in this MD&A constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include, but are not limited to the Company's anticipated use of proceeds from the sale of Pennsaid 2% U.S. rights to Horizon Pharma plc, the litigation settlement with Mallinckrodt Inc. and from the March 2014 Private Placement, the Company's future share price and the Company's possible election to accelerate the expiry date of any of the warrants or the brokers warrants 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 general business and economic uncertainties and adverse market conditions 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.  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.

SOURCE Nuvo Research Inc.

Related Links

http://www.dimethaid.com