MARKHAM, ON, March 6 /PRNewswire-FirstCall/ -- Nuvo Research Inc. (TSX: NRI) today reported consolidated fiscal results for the seven-month period ended December 31, 2005. Effective December 31, 2005 the Company changed its financial year-end from May 31 to December 31, making its future financial results more readily comparable to those of other biotechnology companies. Unless otherwise noted, all comparative figures compare the seven-month period ended December 31, 2005 to the twelve-month period ended May 31, 2005.
Highlights:
- Pennsaid(R) Phase III clinical trial results in which all primary
clinical endpoints were met.
- A panel of FDA experts to advise on the NDA submission for
Pennsaid(R) was formed.
- A Scientific Advisory Board was formed to provide management with
scientific, medical and strategic advice.
- $7.5 million were raised by selling Dimethaid Health Care Ltd.
(DHCL) and entering into a license and supply agreement with
Paladin Labs Inc. for the rights to sell Pennsaid(R) in Canada.
- Development of Pennsaid(R) Plus, a next-generation super-penetrant
formulation of Pennsaid(R), was commenced.
- fqubed Inc., a private California based company, was acquired with
proprietary technology for the development of novel transdermal
drug carriers.
"The positive results from our new Phase III clinical trial for Pennsaid(R) reconfirms that Pennsaid(R) is a safe and effective treatment for osteoarthritis and further validate our transdermal drug delivery approach," said Dr. Henrich Guntermann, Nuvo's President and CEO. "With these results in hand we are proceeding with our amended New Drug Application, which we anticipate filing with the US FDA in mid-2006. We are also pleased that our Pennsaid(R) shipments to wholesalers for the 12 months ended December 31, 2005 rose 26% over the prior year."
Pennsaid(R) is a topical non-steroidal anti-inflammatory (NSAID) used for the treatment of osteoarthritis and is currently approved for sale in Canada and several European countries.
Financial Results:
Revenue for the seven-month period ended December 31, 2005 was $3.2 million compared with revenue of $10.1 million for the twelve-month period ended May 31, 2005. Total Pennsaid(R) revenue during the seven-month period was $2.8 million, down from $9.5 million for the twelve-month period ended May 31, 2005. The 70% decrease was due to the 42% shorter reporting period as well as the sale of the Company's subsidiary Dimethaid Health Care Ltd. ("DHCL") to Paladin Labs Inc. in August 2005. Prior to that sale, Nuvo included DHCL sales of Pennsaid(R) to Canadian wholesalers in its consolidated sales. After the sale, Nuvo no longer records DHCL's sales, but does record the much lower price of Pennsaid(R) sold to DHCL by its manufacturing subsidiary, Dimethaid Manufacturing Inc. Gross profit for the seven-month period was $1.7 million or 62% of net revenue, compared to $5.5 million or 76% of net revenue for the twelve-month period ended May 31, 2005. The current period decrease is due to the shorter reporting period and the sale of DHCL.
Total operating expenses were $9.8 million for the seven-month period ended December 31, 2005 compared to $17.1 million for the twelve-month period ended May 31, 2005.
Research and development expenses were $4.1 million for the seven-month period compared to $6.0 million for the twelve-month period ended May 31, 2005. Taking into account the shorter reporting period the current period increase reflects an increase of 18% primarily due to final site costs incurred to complete the two Pennsaid Phase III clinical trials conducted over the last two years. Research and development expenses are expected to increase in fiscal 2006 with research work planned to expand Nuvo's pipeline and the anticipated commencement of Phase II trials on Pennsaid Plus.
Total selling, general and administrative expenses (SG&A) for the seven-month period were $4.1 million, a 35% decrease from the prior year after adjusting for the shorter reporting period. Total SG&A costs for the twelve-month period ended May 31, 2005 were $10.6 million. Reductions in selling and marketing expenses accounted for substantially all of the decreases in SG&A costs. For the seven-month period ended December 31, 2005 selling and marketing costs were $713,000 compared with $6.1 million for the twelve-month period ended May 31, 2005. The significant decrease is largely due to the sale of DHCL, which eliminated Nuvo's responsibility for Canadian Pennsaid(R) sales and marketing costs pursuant to the co-promotion agreement between DHCL and Solvay Pharma Inc.
Compensation expense related to stock options for the seven-month period ended December 31, 2005 was $839,000, compared with $957,000 for the twelve-month period ended May 31, 2005.
Interest and other income net costs decreased to $773,000 for the seven-month period ended December 31, 2005 compared with $1.1 million for the twelve-month period ended May 31, 2005. The current period decrease is almost entirely due to the shorter seven-month reporting period.
The Company recorded a $2.0 million gain on the sale of its subsidiary DHCL in August 2005. Total proceeds from the transaction were $7.5 million ($2.0 million from the sale of shares of DHCL and $5.5 million of up-front fees paid for long term Canadian license rights to, and a supply contract for, Pennsaid(R) which run to February 2014).
For the twelve-month period ended May 31, 2005, there were non-operating costs of $18.2 million, which included restructuring costs of $5.7 million, amortization of intangibles of $1.1 million, a write-down of intangible assets of $15.5 million and an offset gain on debt settlement of $4.1 million.
The resulting net loss from continuing operations for the seven-month period ended December 31, 2005 was $5.9 million or ($0.05) per share. These results compare with a net loss of $29.8 million or ($0.14) per share for the twelve-month period ended May 31, 2005.
Consolidated cash and cash equivalents amounted to $2.7 million as at December 31, 2005 compared to $3.4 million as at May 31, 2005. Funds used in operating activities were $8.2 million for the seven-month period ended December 31, 2005 compared to $11.8 million for the twelve-month period ended May 31, 2005, reflecting an operating loss for the seven-month period ended December 31, 2005 of 6.5 million (excluding non-cash charges) plus a $1.7 million increase in working capital employed. The increase in working capital is largely due to reductions in accounts payable and accrued liabilities due to the conclusion of Pennsaid Phase III trials, settlement of outstanding severance claims and the sale of DHCL.
Net cash provided by financing activities totalled $7.4 million for the seven-month period ended December 31, 2005 was due to the August 16, 2005 sale of DHCL to Paladin Labs Inc. In the comparable period of the year-ended May 31, 2005 net cash provided by financing activities totalled $14.9 million of which $3.8 million was from a special warrant private placement and $11.2 million from a debenture offering.
The Company is actively pursuing a number of avenues to raise additional cash resources in order to ensure the continued progress of its research and development programs.
Subsequent to year-end, the Company has raised $6.5 million in non-dilutive financing from three financial events. First, on January 6, 2006 the Company sold its head office in Markham, Ontario. Second, on January 17, 2006 the Company expanded its Pennsaid(R) rights agreement with Squire Pharmaceuticals Inc. (formerly Dimethaid Health Care Ltd.) and raised $500,000 from the issue to Squire of a three-year convertible debenture. Third, from December 31, 2005 to February 28, 2006, the Company has received $1.7 million in cash proceeds from warrants exercised and employee stock purchases.
Notice of Annual General Meeting
Nuvo will be holding its Annual Meeting of Shareholders on Thursday, May 4, 2006 at the Ontario Heritage Centre, 8 Adelaide Street East, Toronto, Ontario M5C 1J3. The meeting will begin at 9:00 a.m.
About Nuvo Research Inc.
Nuvo is focused on developing innovative site-specific therapeutics that are delivered topically using the Company's skin-penetrating technologies. Nuvo's lead product is Pennsaid(R), a topical non-steroidal anti-inflammatory (NSAID) used for the treatment of osteoarthritis. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of transdermal products targeting a variety of indications.
Nuvo Research Inc. is a publicly traded, Canadian pharmaceutical company headquartered in Markham, Ontario, with manufacturing facilities in Varennes, Quebec and Wanzleben, Germany. For more information, please visit http://www.nuvoresearch.com/.
This release may contain forward-looking statements, subject to risks and uncertainties beyond management's control. Actual results could differ materially from those expressed here. Risk factors are discussed in the Company's annual information form filed with the securities commissions in each of the provinces of Canada. The Company undertakes no obligation to revise forward-looking statements in light of future events.
Summary financial statements attached:
For complete financial statements please go to http://www.sedar.com/
CONSOLIDATED BALANCE SHEETS
As at As at
(thousands of CDN dollars) Dec 31, 2005 May 31, 2005
$ $
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ASSETS
CURRENT
Cash and cash equivalents 2,716 3,418
Accounts receivable 612 813
Inventories 823 869
Prepaid expenses and other 569 414
Current assets of discontinued operations - 39
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TOTAL CURRENT ASSETS 4,720 5,553
Property, plant and equipment 3,216 2,790
Assets held for sale 2,321 2,245
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TOTAL ASSETS 10,257 10,588
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LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT
Accounts payable and accrued liabilities 3,809 5,921
Accounts payable - discontinued operations - 9
Deferred revenue 879 -
Short term loan 2,041 1,806
Current portion of long term debt 1,324 665
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TOTAL CURRENT LIABILITIES 8,053 8,401
Deferred revenue 4,465 -
Long term debt 1,035 1,766
Debentures 1,158 898
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TOTAL LIABILITIES 14,711 11,065
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SHAREHOLDERS' DEFICIENCY
Capital stock 145,404 144,588
Warrants 9,720 9,720
Contributed surplus 3,957 3,127
Cumulative translation adjustment 114 114
Deficit (163,649) (158,026)
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TOTAL SHAREHOLDERS' DEFICIENCY (4,454) (477)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 10,257 10,588
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CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Seven-months
ended Year ended
(thousands of CDN dollars) Dec 31, 2005 May 31, 2005
$ $
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REVENUE 3,226 10,112
Revenue allocation (518) (2,913)
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NET REVENUE 2,708 7,199
Cost of sales 1,025 1,718
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GROSS PROFIT 1,683 5,481
LICENCE FEES 192 -
EXPENSES
Research and development 4,122 5,991
Selling, general and administrative
(SG&A) expenses 4,096 10,574
Stock based compensation 839 957
Amortization of property, plant, and equipment 290 571
Foreign currency (gain) (301) (2,066)
Interest and other expense 773 1,072
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9,819 17,099
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LOSS FROM OPERATIONS (7,944) (11,618)
Gain on sale of subsidiary 1,956 -
Gain on debt settlements - 4,137
Amortization of intangibles - (1,135)
Writedown of intangibles - (15,488)
Restructuring (costs) recovery 101 (5,740)
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NET LOSS FROM CONTINUING OPERATIONS (5,887) (29,844)
NET EARNINGS FROM DISCONTINUED OPERATIONS 264 38
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NET LOSS (5,623) (29,806)
Deficit, beginning of period (158,026) (141,383)
Adjustment for prior year stock options - (2,143)
Accretion on acquisition commitments - (7,551)
Gain on restructuring acquisition commitments - 22,857
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DEFICIT, END OF PERIOD (163,649) (158,026)
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NET LOSS PER COMMON SHARE
- continuing operations basic and diluted (0.05) (0.14)
- discontinued operations basic and diluted (0.00) (0.00)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Seven-months
ended Year ended
(thousands of CDN dollars) Dec 31, 2005 May 31, 2005
$ $
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OPERATING ACTIVITIES - continuing operations
Net loss for the period (5,887) (29,844)
Adjustment for items not affecting cash:
Amortization 290 1,706
Gain on sale of subsidiary (1,956) -
Deferred revenue recognized (192) -
Writedown of intangibles - 15,488
Stock based compensation 939 957
Accretion of interest on debentures 272 261
Non-cash foreign exchange (gain)
on acquisition commitments - (1,982)
Gain on debt settlements - (4,137)
Loss on disposal of property, plant & equipment - 3,758
Net change in non-cash working capital balances (1,712) 2,036
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CASH USED IN OPERATING ACTIVITIES -
continuing operations (8,246) (11,757)
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INVESTING ACTIVITIES - continuing operations
Acquisition of fqubed (51) -
Acquisition of property, plant and equipment (11) (97)
Proceeds from disposal of property,
plant, and equipment 28 63
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CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES - continuing operations (34) (34)
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FINANCING ACTIVITIES - continuing operations
Issuance of common stock - 3,766
Debentures issued - 11,191
Proceeds on sale of subsidiary 1,956 -
Proceeds from license and supply agreements 5,500 -
Long term debt (26) (26)
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CASH PROVIDED BY FINANCING ACTIVITIES -
continuing operations 7,430 14,931
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Cash flow provided by (used in)
discontinued operations 358 32
Effect of foreign currency exchange rate
changes on cash and cash equivalents (210) (170)
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Net increase (decrease) in cash and
cash equivalents during the period (702) 3,002
Cash and cash equivalents, beginning of period 3,418 416
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CASH AND CASH EQUIVALENTS, END OF PERIOD 2,716 3,418
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Interest paid 241 755
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