Nuvo Research announces 2012 third quarter results

MISSISSAUGA, ON, Oct. 31, 2012 /CNW/ - 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 third quarter ended September 30, 2012.

Third Quarter and Recent Corporate Developments:

• The Company was informed by Galderma that it has received U.S. Food and Drug Administration (FDA) approval for the Pliaglis supplemental New Drug Application (sNDA);
• The Company was advised by Galderma that it has received marketing licenses in 8 countries bringing the total to 10 countries, the first 3 licenses entitled Nuvo to the full US$6.0 million of milestone payments;
• The New Drug Application (NDA) for Pennsaid 2% was accepted by the FDA with a Prescription Drug User Fee Act (PDUFA) date of March 4, 2013;
• The patent relating to a method of using Pennsaid was issued by the U.S. Patent Office and filed in the FDA Orange Book;
• The Company and Mallinckrodt Inc. (Mallinckrodt), the pharmaceuticals business of Covidien 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 Pennsaid 2% Patent was issued by the U.S. Patent Office and submitted for filing in the FDA Orange Book;
• The U.S. Patent Office reinstated a patent related to the 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 will provide Nuvo with up to €4.4 million of additional funding for the further development of its improved reformulated version of WF10; and
• A new patent relating to a method of treating allergic asthma, allergic rhinitis and atopic dermatitis using a chlorite-based formulation such as WF10, expiring in 2029, was issued by the U.S. Patent Office.

"We continue to make progress with all of our product franchises," said Dan Chicoine, Nuvo's Chairman and CEO.  "The FDA approval of Pliaglis, the FDA filing and acceptance of the NDA for Pennsaid 2% with a PDUFA date in March 2013, the issued patents for Pennsaid 2% in the U.S. and the additional patent protection for Synera - move us forward in our strategy of building a specialty pharmaceutical company focused on pain."

Pennsaid U.S.

According to IMS Health, a provider of dispensed prescription data, during the third quarter of 2012, U.S. prescriptions of Pennsaid were 56,000 with an average 1.32 bottles of Pennsaid dispensed per script. This represents a decrease of approximately 41% from the second quarter of 2012 during which there was a substantial increase in Pennsaid prescriptions due to a supply disruption of its main competitor product Voltaren Gel.

Operating Results

Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended September 30, 2012 decreased to $3.5 million compared to $4.0 million for the three months ended September 30, 2011. In the current quarter, a decrease in product sales primarily related to a significant quantity of Pennsaid samples that were sold in the U.S. in the comparative quarter was only partially offset by an increase in licensing fees primarily related to US$1.0 million in milestone revenue earned by the Company upon the marketing approval of Pliaglis in the third European country.  Total revenue for the nine months ended September 30, 2012 was $21.1 million compared to $11.5 million for the nine months ended September 30, 2011.

For the three months ended September 30, 2012 and September 30, 2011, the Company reported a negative gross margin on product sales of $0.3 million.  The negative gross margin in the current quarter was attributable to the significant decrease in Pennsaid product sales and a planned 4 week shutdown of the Pennsaid manufacturing facility during the quarter to prepare for the U.S. launch of Pennsaid 2% if approved by the FDA.  For the nine months ended September 30, 2012, gross margin on product sales were $1.3 million compared to $1.2 million for the nine months ended September 30, 2011.

Total operating expenses for the three and nine months ended September 30, 2012 were $5.2 million and $17.2 million compared to $4.2 million and $13.4 million for the three and nine months ended September 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 U.S.

R&D expenses were $1.7 million for the three months ended September 30, 2012 and compared to $1.5 million for the three months ended September 30, 2011.  For the quarter, the increase in costs is associated with ongoing development costs for Synera.  R&D expenses for the nine months ended September 30, 2012 were $5.3 million compared to $5.6 million for the nine months ended September 30, 2011.

S&M expenses were $1.2 million and $4.6 million for the three and nine months ended September 30, 2012 compared to $nil for the three and nine months ended September 30, 2011.  S&M expenses were entirely attributable to the U.S. launch of Synera.  In the quarter, the Company refocused its resources on large national accounts such as dialysis centers, infusion centers and blood diagnostic laboratories.  To execute this strategy the Company terminated its agreement with its contract sales organization.  The Pain Group's internal commercial team will continue to focus on the national accounts and the key interventional pain doctors that use Synera.

G&A expenses were $2.2 million for the three months ended September 30, 2012 compared to $2.8 million for the three months ended September 30, 2011.  The decrease is related to lower ZARS infrastructure costs.  G&A expenses decreased to $7.0 million for the nine months ended September 30, 2012 compared to $7.9 million for the nine months ended September 30, 2011.

Net loss was $3.2 million for the three months ended September 30, 2012 compared to $2.2 million for the three months ended September 30, 2011. The increase in net loss was attributable to the milestone revenue earned from Galderma partially offset by higher operating expenses.  Net loss for the nine months ended September 30, 2012 was $1.9 million compared to $5.1 million for the nine months ended September 30, 2011.

Cash and cash equivalents were $11.5 million as at September 30, 2012 compared to $14.7 million as at December 31, 2011.

Cash used in operating activities was $1.7 million for the three months ended September 30, 2012 compared to $3.2 million for the three months ended September 30, 2011.  The decrease mainly related to a recovery of non-cash working capital of $1.2 million in the three months ended September 30, 2012 compared to an investment in working capital of $1.0 million in the three months ended September 30, 2011.  For the nine months ended September 30, 2012, cash used in operating activities was $6.1 million for the nine months ended September 30, 2012 versus $8.6 million for the nine months ended September 30, 2011.

Cash used by financing activities was $0.7 million in the three months ended September 30, 2012, an increase from $1,000 for the three months ended September 30, 2011, due to repayments of long-term obligations.  During the year, the Company received loan proceeds of $4.0 million from Paladin which represents the first tranche of an $8.0 million loan.  Net cash provided by financing activities was $3.2 million in the nine months ended September 30, 2012 compared to cash used by financing activities of $3.1 million in the nine months ended September 30, 2011.  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 September 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, November 1, 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, November 8, 2012 by calling 416-849-0833 or 1-855-859-2056, reference number 30403526.

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 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 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 September 30, 2012	As at December 31, 2011
(Canadian dollars in thousands)		$	$
ASSETS
CURRENT
Cash and cash equivalents		11,490	14,724
Accounts receivable		7,702	3,700
Inventories		1,871	1,844
Other current assets		1,534	1,307
TOTAL CURRENT ASSETS		22,597	21,575
Property, plant and equipment		1,615	1,960
Intangible assets		16,121	16,821
Goodwill		4,349	4,498
TOTAL ASSETS		44,682	44,854
LIABILITIES AND EQUITY
CURRENT
Accounts payable and accrued liabilities		5,446	5,208
Current portion of deferred revenue		410	1,494
Current portion of finance lease and other obligations		2,047	55
TOTAL CURRENT LIABILITIES		7,903	6,757
Deferred revenue		142	398
Finance lease and other obligations		1,677	489
TOTAL LIABILITIES		9,722	7,644
EQUITY
Common shares		228,469	228,306
Contributed surplus		16,711	16,405
Accumulated other comprehensive income		176	964
Deficit		(210,396)	(208,465)
TOTAL EQUITY		34,960	37,210
TOTAL LIABILITIES AND EQUITY		44,682	44,854

		NUVO RESEARCH INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
Unaudited				Three Months Ended September 30,		Nine Months Ended September 30,
				2012	2011	2012	2011
(Canadian dollars in thousands, except per share and share figures)				$	$	$	$
REVENUE
Product sales				1,012	1,758	6,781	6,337
Cost of goods sold				1,327	2,026	5,505	5,104
Gross margin on product sales				(315)	(268)	1,276	1,233
Other revenue
Royalties				1,356	1,504	7,006	3,887
Licensing fees				1,099	588	7,167	1,096
Research and other contract revenue				33	107	132	223
				2,173	1,931	15,581	6,439
OPERATING EXPENSES
Research and development expenses				1,653	1,488	5,310	5,614
Sales and marketing expenses				1,208	-	4,602	-
General and administrative expenses				2,233	2,772	7,039	7,926
Interest expense				150	7	250	9
Interest income				(5)	(32)	(15)	(131)
				5,239	4,235	17,186	13,418
OTHER EXPENSES (INCOME)
Litigation settlement				(277)	-	(277)	-
Gain on ZARS contingent consideration				-	-	-	(1,770)
Foreign currency loss (gain)				319	(131)	429	(157)
Net loss before income taxes				(3,108)	(2,173)	(1,757)	(5,052)
Income taxes				48	30	174	74
NET LOSS				(3,156)	(2,203)	(1,931)	(5,126)
Other comprehensive income (loss)
Unrealized gains (losses) on translation of foreign operations				(786)	1,710	(788)	1,728
TOTAL COMPREHENSIVE LOSS				(3,942)	(493)	(2,719)	(3,398)
Net loss attributable to:
Owners of the parent				(3,156)	(1,747)	(1,931)	(4,093)
Non-controlling interest				-	(456)	-	(1,033)
				(3,156)	(2,203)	(1,931)	(5,126)
Total comprehensive loss attributable to:
Owners of the parent				(3,942)	(41)	(2,719)	(2,278)
Non-controlling interest				-	(452)	-	(1,120)
				(3,942)	(493)	(2,719)	(3,398)
Net loss per common share - basic and diluted				(0.006)	(0.004)	(0.003)	(0.011)
Average number of common shares outstanding (in millions)
	Basic and diluted			565.7	518.4	565.5	470.1

NUVO RESEARCH INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Unaudited			Three Months Ended September 30,		Nine Months Ended September 30,
			2012	2011	2012	2011
(Canadian dollars in thousands)			$	$	$	$
OPERATING ACTIVITIES
Net loss			(3,156)	(2,203)	(1,931)	(5,126)
Items not involving current cash flows:
	Gain on ZARS contingent consideration		-	-	-	(1,770)
	Depreciation and amortization		154	279	517	595
	Deferred license revenue recognized		(85)	(588)	(1,007)	(1,096)
	Deferred royalty revenue, net of royalties earned		(218)	(93)	(316)	(261)
	Stock-based compensation		87	128	576	324
	Unrealized foreign exchange loss		336	254	315	197
	Interest and accretion of long-term other obligations		(42)	-	55	-
	Other		(2)	5	14	13
			(2,926)	(2,218)	(1,777)	(7,124)
Net change in non-cash working capital			1,227	(985)	(4,345)	(1,503)
CASH USED IN OPERATING ACTIVITIES			(1,699)	(3,203)	(6,122)	(8,627)
INVESTING ACTIVITIES
Acquisition of ZARS Pharma Inc.			-	-	-	1,477
Share issuance fees on acquisition of ZARS Pharma, Inc.			-	(67)	-	(67)
Proceeds on disposal of property, plant and equipment			8	-	8	-
Acquisition of property, plant and equipment			(23)	(34)	(38)	(114)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			(15)	(101)	(30)	1,296
FINANCING ACTIVITIES
Proceeds from other obligations			-	-	4,000	-
Repayment of other obligations			(691)	-	(859)	(3,022)
Issuance of common shares			-	-	22	29
Repayments of finance lease obligations			(1)	(1)	(2)	(62)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(692)	(1)	3,161	(3,055)
Effect of exchange rate changes on cash and cash equivalents			(200)	118	(243)	155
Net change in cash and cash equivalents during the period			(2,606)	(3,187)	(3,234)	(10,231)
Cash and cash equivalents, beginning of period			14,096	21,225	14,724	28,269
CASH AND CASH EQUIVALENTS, END OF PERIOD			11,490	18,038	11,490	18,038
Interest paid			152	1	152	4
Interest received			6	36	21	135
Income taxes paid			54	21	160	63

 

 

SOURCE: Nuvo Research Inc.

Further information on Nuvo Research is available on the company's website www.nuvoresearch.com or by contacting:

Investor Relations
Email: [email protected]