Nuvo Research announces 2011 fourth quarter & year-end results

MISSISSAUGA, ON, Feb. 29, 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 fourth quarter and year ended December 31, 2011.

Fourth Quarter and Recent Corporate Developments:

• Pennsaid^® U.S. prescriptions continue to grow to new highs. U.S. prescriptions grew to 47,000 in the fourth quarter of 2011, an increase of approximately 2% over the previous quarter and have recently increased significantly due in part to temporary product shortages of Pennsaid's main competitor product, Voltaren^® Gel. U.S. prescriptions for the most recently reported week of February 17, 2012 were approximately double the average weekly prescriptions in Q4 2011;
  
  
• Launched the marketing and sale of Synera^® to U.S. interventional pain doctors with a dedicated 21 person contract sales force;
  
  
• Galderma Pharma S.A. (Galderma) advised that applications for Pliaglis^® approval are now under active review by regulatory authorities in the U.S., Canada and E.U. and that the U.S. Food and Drug Administration (FDA) has set a PDUFA (Prescription Drug User Fee Act) date of April 16, 2012 for action on the U.S. submission. The Company anticipates a response from the E.U. regulatory authorities in the second quarter of 2012.  Nuvo has licensed worldwide marketing rights for Pliaglis to Galderma;
  
  
• Mallinckrodt Inc., a Covidien company (NYSE: COV), advised that it intends to file a supplemental New Drug Application (sNDA) with the FDA for Pennsaid 2%, the follow-on product to Pennsaid, in the second quarter of 2012 and that Pennsaid 2% may be eligible for FDA approval in the fourth quarter of 2012 or the first quarter of 2013. Nuvo has licensed U.S. marketing rights for Pennsaid and Pennsaid 2% to Covidien; and
  
  
• Increased its ownership in Nuvo Research AG to 100% by acquiring the 40% interest held by the minority owner. Nuvo Research AG owns the rights to the immune modulating drug product, WF10.

"We are pleased with the progress of our three key commercial stage products - the U.S. launch of Synera, advancement towards Pliaglis' approval and launch in the U.S. and Europe and the anticipated filing of the Pennsaid 2% sNDA with the FDA," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research.  "These important milestones support our strategy to build Nuvo into a successful specialty pharmaceutical company focused on the treatment of pain."

Pennsaid U.S.

According to IMS Health, during the fourth quarter of 2011, U.S. prescriptions of Pennsaid continued to grow quarter-over-quarter to a record of approximately 47,000 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 third quarter of 2011. The 2010 Pennsaid prescriptions were generated over approximately eight months from the launch date in late April.

In the first quarter of 2012, Endo Pharmaceuticals Holdings Inc. (Endo) indicated that there will 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 may have contributed to recent substantial increases in Pennsaid U.S. prescriptions. According to the most recent available data from IMS Health, U.S. Pennsaid prescriptions for the week of February 17, 2012 were 7,184 which is approximately double the average weekly number of prescriptions in the fourth quarter of 2011. Endo has indicated that it does not expect normal Voltaren Gel availability until the end of the second quarter of 2012.  The Company does not know how Voltaren Gel product shortages may impact Pennsaid prescriptions after Voltaren Gel supply shortages end.

For the year, approximately 167,000 Pennsaid prescriptions were dispensed, an increase of 149% over 2010, and for each prescription, approximately 1.3 bottles of Pennsaid were dispensed.

Operating Results

Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended December 31, 2011 increased to $5.2 million compared to $4.8 million for the three months ended December 31, 2010.  In the current quarter, the increased royalty revenue earned on Pennsaid sales in the U.S. and Canada and Synera sales in Europe more than offset a decrease in product sales.  The decrease in product sales in the quarter is primarily related to a $0.8 million decrease in sales to our Greek distributor as all topical antirheumatics, including Pennsaid, lost government reimbursement in the first half of 2011 through one of Greece's austerity measures and subsequently sales for the entire class declined materially.  For the year, total revenue was $16.7 million compared to $17.0 million for the year ended December 31, 2010.

Gross margin on product sales decreased to $0.4 million for the three months ended December 31, 2011 compared to $0.9 million for the three months ended December 31, 2010.  The decrease in gross margin was attributable to the decrease in Pennsaid sales and a $0.1 million write-down of WF10 finished goods inventory.  For the year, gross margin on product sales decreased to $1.7 million compared to $4.0 million in 2010.

Total operating expenses for the three months ended December 31, 2011 increased to $5.4 million versus $3.6 million for the three months ended December 31, 2010. The increase in operating expenses was primarily due to the inclusion of a $1.3 million Qualifying Therapeutic Discovery Project (QTDP) grant as a reduction to R&D expenses in 2010.  Excluding the impact of this grant, operating expenses increased by a more modest $0.5 million primarily due to higher G&A and S&M expenses which were partially offset by lower R&D expenses as the company scaled these activities back in the first half of 2011.  Total operating expenses for the year ended December 31, 2011 were $18.8 million compared to $17.5 million for the year ended December 31, 2010.

R&D expenses for the quarter were unchanged at $1.7 million compared to the three months ended December 31, 2010.  The prior year included the $1.3 million QTDP grant as a reduction to R&D expenses.  Excluding this item, R&D expenses decreased by $1.3 million due to the closure of the Company's San Diego research facility at the end of January 2011 and a corresponding reduction in the size of the Company's early stage R&D team.  For the year, R&D expenses decreased to $7.3 million compared to $9.3 million for the year ended December 31, 2010.

S&M expenses were $1.3 million for the three months and year ended December 31, 2011 and $nil for the comparable periods in 2010. S&M expenses relate entirely to Synera.  Synera is directly marketed by the Company in the U.S.  In 2011, the Company strengthened its commercial team by hiring experienced pharmaceutical executives to plan and begin preparations for a 2012 U.S. relaunch of Synera, targeting interventional pain physicians.

G&A expenses increased to $2.4 million for the three months ended December 31, 2011 compared to $1.9 million for the three months ended December 31, 2010.  The increase in the quarter relates to the inclusion of ZARS in 2011 and termination benefits.  For the year, G&A expenses increased to $10.3 million compared to $8.4 million for the year ended December 31, 2010.

Net loss was $2.6 million for the three months ended December 31, 2011 compared to $1.6 million for the three months ended December 31, 2010.  The increased loss was substantially a result of the absence of the QTDP grant in the current quarter versus a year ago.  For the year, net loss was $7.7 million compared to $13.3 million for the year ended December 31, 2010.

Cash and cash equivalents were $14.7 million as at December 31, 2011 compared to $18.0 million as at September 30, 2011 and $28.3 million at December 31, 2010.

Cash used in operating activities of $3.2 million was $0.9 million higher than the cash used in operating activities of $2.3 million for the three-month period ended December 31, 2010 due to the increase in the net loss. For the year cash used in operating activities decreased to $11.8 million compared to $12.4 million for the year ended December 31, 2010.

The number of common shares outstanding as at December 31, 2011 was 564.0 million.

Management to Host Conference Call

Management will host a conference call to discuss the fourth quarter and year-end results on Thursday, March 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, March 8, 2012 by calling 416-849-0833 or 1-855-859-2056, reference number 45482035.

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 Pain Group, located in West Chester, Pennsylvania, is focused on the development and commercialization of topically delivered pain products.  The Company's product portfolio includes Pennsaid, Pliaglis and Synera.  Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), is used to treat the signs and symptoms of osteoarthritis of the knee.  Pennsaid is sold in the United States by Mallinckrodt Inc., a Covidien company (NYSE: COV), in Canada by Paladin Labs Inc. (TSX:PLB) and in several European countries. Pliaglis is a topical local anesthetic cream, which is U.S. Food and Drug Administration (FDA) approved to provide topical local analgesia for superficial dermatological procedures.  The Company has licensed worldwide marketing rights to Pliaglis to Galderma Pharma S.A., a global specialty 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.  Through its subsidiary, Nuvo Research GmbH, based in Leipzig, Germany, 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 Consolidated Financial Statements, Management's Discussion & Analysis, 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. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
				As at December 31, 2011				As at December 31, 2010				As at January 1, 2010
(Canadian dollars in thousands)				$				$				$
ASSETS
CURRENT
Cash and cash equivalents				14,724				28,269				42,102
Accounts receivable				3,700				3,100				2,086
Inventories				1,844				1,716				2,069
Other current assets				1,307				2,143				450
TOTAL CURRENT ASSETS				21,575				35,228				46,707
Property, plant and equipment				1,960				2,016				1,805
Intangible assets				16,821				-				-
Goodwill				4,498				-				-
TOTAL ASSETS				44,854				37,244				48,512
LIABILITIES AND EQUITY
CURRENT
Accounts payable and accrued liabilities				5,208				4,203				4,589
Deferred revenue				1,494				1,093				2,241
Current portion of finance lease obligations				2				63				79
Current portion of other obligations				53				-				3,038
TOTAL CURRENT LIABILITIES				6,757				5,359				9,947
Deferred revenue				398				739				1,080
Finance lease obligations				8				11				65
Other obligation				481				-				-
TOTAL LIABILITIES				7,644				6,109				11,092
EQUITY
Equity attributable to owners of the parent
Common shares				228,306				216,864				210,086
Contributed surplus				16,405				12,885				12,543
Accumulated other comprehensive income (AOCI)				964				(257)				-
Deficit				(208,465)				(197,654)				(185,209)
				37,210				31,838				37,420
Non-controlling interest				-				(703)				-
TOTAL EQUITY				37,210				31,135				37,420
TOTAL LIABILITIES AND EQUITY				44,854				37,244				48,512

NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
				Three months ended December 31								Twelve months ended December 31
				2011				2010				2011				2010
(Canadian dollars in thousands, except per share and share figures)				$				$				$				$
REVENUE
Product sales				2,611				3,305				8,948				12,484
Cost of goods sold				2,165				2,424				7,269				8,460
Gross margin on product sales				446				881				1,679				4,024
OTHER REVENUE
Royalties				1,884				871				5,771				1,707
Licensing fees				545				561				1,641				2,241
Research and other contract revenue				150				100				373				589
				3,025				2,413				9,464				8,561
OPERATING EXPENSES
Research and development expenses				1,709				1,704				7,323				9,260
Sales and marketing expenses				1,312				-				1,312				-
General and administrative expenses				2,380				1,947				10,306				8,361
Interest expense				1				2				8				68
Interest income				(23)				(60)				(152)				(163)
				5,379				3,593				18,797				17,526
OTHER (INCOME) EXPENSES
Foreign currency loss				312				376				155				718
Gain on disposal of property, plant and equipment				(114)				-				(114)				-
Gain on ZARS contingent consideration				-				-				(1,770)				-
Loss on early redemption of debentures				-				-				-				3,547
Net loss before income taxes				(2,552)				(1,556)				(7,604)				(13,230)
Income taxes				30				22				104				43
NET LOSS				(2,582)				(1,578)				(7,708)				(13,273)
Other comprehensive income (loss)
Unrealized gains (losses) on translation of foreign operations				(631)				(84)				1,097				(132)
TOTAL COMPREHENSIVE LOSS				(3,213)				(1,662)				(6,611)				(13,405)
Net loss attributable to:
Owners of the parent				(2,346)				(1,501)				(6,439)				(12,445)
Non-controlling interest				(236)				(77)				(1,269)				(828)
				(2,582)				(1,578)				(7,708)				(13,273)
Total comprehensive loss attributable to:
Owners of the parent				(3,032)				(1,655)				(5,310)				(12,702)
Non-controlling interest				(181)				(7)				(1,301)				(703)
				(3,213)				(1,662)				(6,611)				(13,405)
Net loss per common share - basic and diluted				$(0.005)				$(0.004)				$(0.016)				$(0.032)
Average number of common shares outstanding - basic and diluted (millions)				529.6				417.4				485.1				413.2

NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
					Three months ended December 31									Twelve months ended December 31
					2011					2010				2011				2010
(Canadian dollars in thousands)					$					$				$				$
OPERATING ACTIVITIES
Net loss					(2,582)					(1,578)				(7,708)				(13,273)
Items not involving current cash flows:
	Loss on early redemption of debentures				-					-				-				3,547
	Gain on ZARS contingent consideration				-					-				(1,770)				-
	Depreciation and amortization				109					219				704				590
	Deferred license revenue recognized				(545)					(561)				(1,641)				(2,241)
	Deferred royalty revenue, net of royalties earned				(70)					18				(331)				715
	Stock-based compensation				118					199				442				331
	Unrealized foreign exchange loss				172					331				369				696
	Inventory write-down				109					-				109				-
	Gain on disposal of property, plant and equipment				(114)					-				(114)				-
	Accretion of long-term obligations				6					-				6				31
	Other				-					2				13				11
					(2,797)					(1,370)				(9,921)				(9,593)
Net change in non-cash working capital					(415)					(965)				(1,918)				(2,773)
CASH USED IN OPERATING ACTIVITIES					(3,212)					(2,335)				(11,839)				(12,366)
INVESTING ACTIVITIES
Acquisition of ZARS					(16)					-				1,394				-
Proceeds on disposal of property, plant and equipment					173					-				173				-
Acquisition of property, plant and equipment					(47)					(46)				(161)				(842)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES					110					(46)				1,406				(842)
FINANCING ACTIVITIES
Repayment of acquired debt					-					-				(3,022)				-
Issuance of common shares					19					79				48				84
Repayments of finance lease obligations					(1)					(20)				(63)				(77)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES					18					59				(3,037)				7
Effect of exchange rate changes on cash and cash equivalents					(230)					(294)				(75)				(632)
Net change in cash and cash equivalents during the period					(3,314)					(2,616)				(13,545)				(13,833)
Cash and cash equivalents, beginning of period					18,038					30,885				28,269				42,102
CASH AND CASH EQUIVALENTS, END OF YEAR					14,724					28,269				14,724				28,269
Interest paid					1					2				5				60
Interest received					26					60				161				130
Income taxes paid					27					39				90				39

 

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

Investor Relations
Email: [email protected]