MISSISSAUGA, ON, July 29 /PRNewswire-FirstCall/ -- Nuvo Research Inc. (TSX: NRI), a drug development company focused on the research and development of drug products that are delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the quarter ended June 30, 2010.
Key Corporate Developments: - Announced that Mallinckrodt Inc., a Covidien company ("Covidien"), Nuvo's licensee, began selling Pennsaid, a topical NSAID, in the United States. Nuvo receives royalties at rates consistent with industry standards from Covidien on net U.S. Pennsaid sales. Nuvo is also eligible to receive sales milestone payments totaling up to US$100 million if certain U.S. sales levels are achieved; - Completed enrollment in Nuvo's European Phase 2 trial evaluating WF10 as a treatment for allergic rhinitis. The Company anticipates completing the in-patient portion of the study and receiving topline results in late 2010; - Subsequent to quarter end, Nuvo received its first royalty payment in the amount of CDN$1.2 million from Covidien relating to U.S. sales of Pennsaid; - Subsequent to quarter end, Covidien began recruiting participants in its Phase 2 clinical study of Pennsaid Gel, a follow-on product to Pennsaid with two times per day dosing and anticipated patent protection.
"We are pleased with Covidien's launch of Pennsaid in the United States," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research. "Covidien has indicated that Pennsaid is doing well in the marketplace. While it is early in the process, we are optimistic that Pennsaid will continue its upward sales trend in the U.S. We are also encouraged that it appears that Pennsaid's commercial launch is expanding the overall U.S. topical NSAID market. An expanding market creates heightened awareness and acceptance among physicians and patients about the benefits of this relatively new U.S. drug class, which could result in increased future Pennsaid sales and revenue for Nuvo."
Financial Results: (thousands of Canadian dollars) Three months Three months Six months Six months ended ended ended ended June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009 ------------------------------------------------------------------------- $ $ $ $ ------------------------------------------------------------------------- Revenue 4,244 2,706 8,295 5,753 Net loss (2,862) (1,664) (5,867) (4,532) ------------------------------------------------------------------------- Operating Results
Revenue consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2010 increased 57% to $4.2 million compared to $2.7 million for the three months ended June 30, 2009. The increase was primarily attributable to the launch of Pennsaid in the United States in late April 2010 as the Company recorded $1.3 million in Pennsaid product sales and royalty revenue earned on the net sales of Pennsaid in the U.S. Although early in the launch, management is encouraged by the market data and metrics for prescriptions, average units dispensed per prescription, patient days dispensed and the qualitative feedback received from our U.S. licensee Covidien. Revenue for the six months ended June 30, 2010 increased by 44% to $8.3 million compared to $5.8 million for the six months ended June 30, 2009 primarily due to the U.S. launch.
Gross margin on product sales increased to $1.2 million for the three months ended June 30, 2010 compared to $0.6 million for the three months ended June 30, 2009. The increase in gross margin is primarily attributable to higher Pennsaid sales as a result of the U.S. launch and the negative impact that the planned eight-week shutdown of the Pennsaid manufacturing facility had on the comparative period. For the six months ended June 30, 2010, gross margin on product sales was $2.3 million compared to $1.9 million for the six months ended June 30, 2009. The increase in gross margin is primarily attributable to higher Pennsaid sales, partially offset by the significant weakening of the euro and British pound against the Canadian dollar.
Total operating expenses, excluding foreign currency gains and losses, for the three and six months ended June 30, 2010 were $4.8 million and $9.3 million versus $3.1 million and $7.9 million for the three and six months ended June 30, 2009. The increase in the quarter and six-month period relates primarily to higher selling, general and administrative expenses (SG&A), research and development (R&D) expenses offset by lower net interest expense and amortization.
R&D expenses were $2.2 million and $4.5 million for the three and six months ended June 30, 2010, an increase compared to $0.9 million and $3.8 million for the three and six months ended June 30, 2009. The increase observed this quarter versus a year ago is primarily related to a $0.9 million reimbursement payment received from Covidien in June 2009 for specific R&D costs incurred prior to the Effective Date under the terms of the U.S. Licensing Agreement. The remaining increase in the three and six-month periods primarily related to establishing the Pain Group in the U.S. and conducting the Phase 2 allergic rhinitis trial for WF10, which is partially funded by the SAB, in Leipzig, Germany.
SG&A expenses increased to $2.5 million and $4.5 million for the three and six months ended June 30, 2010 compared to $1.9 million and $3.4 million for the three and six months ended June 30, 2009. The increase in both periods is primarily related to an increase in compensation costs. During the quarter, the Compensation Committee retained the services of Radford, the leading executive compensation consultant to the life sciences industry in North America to help establish an executive and senior management compensation philosophy and to make compensation recommendations. The recommendations were implemented in the quarter. Also contributing to the increase is consulting, professional fees and other fees relating to the Company's business development activities aimed at expanding its drug development pipeline.
Net interest income was $13,000 for the three months ended June 30, 2010 compared to net interest expense of $218,000 for the three months ended June 30, 2009. For the six months ended June 30, 2010, net interest expense was $21,000 compared to $430,000 for the six months ended June 30, 2009. The decrease in both periods is attributable to lower non-cash accretion charges and cash interest payments on the convertible debentures as all outstanding debentures were converted into common shares during 2009 and the first quarter of 2010.
Net loss was $2.9 million and $5.9 million for the three and six months ended June 30, 2010 compared to $1.7 million and $4.5 million for the three months ended June 30, 2009. The larger net loss in both periods is attributable to higher SG&A, R&D expenses and foreign currency losses that were only partially offset by a higher gross margin, U.S. royalty revenue and lower interest expense.
Cash and cash equivalents were $32.9 million as at June 30, 2010, a $9.2 million decrease from $42.1 million as at December 31, 2009, primarily as a result of the $5.9 million loss and a $2.1 million investment in non-cash working capital primarily related to the U.S. launch of Pennsaid.
Cash used in operations was $3.2 million and $6.0 million for the three and six months ended June 30, 2010 compared to $2.0 million and $4.9 million for the three and six months ended June 30, 2009. The increase in cash used in operations is primarily attributable to the higher net loss in both periods.
Net cash used in investing activities totaled $370,000 and $604,000 for the three and six months ended June 30, 2010 compared to $148,000 and $203,000 for the three and six months ended June 30, 2009. The additions in the three and six months ended June 30, 2010 primarily represent the purchase of production automation and laboratory equipment.
Net cash used in financing activities totaled $14,000 and $33,000 for the three and six months ended June 30, 2010 and related primarily to scheduled capital lease payments. For the three and six months ended June 30, 2009, cash provided by financing activities totaled $3.2 million and $5.3 million and was primarily attributed to proceeds received upon the exercise of warrants as part of and subsequent to the early warrant incentive program.
About Nuvo Research Inc.
Nuvo is primarily focused on the research and development of drug products delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10. Nuvo's lead product is Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), which is sold in Canada, several European countries and the United States. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of topical and transdermal products targeting a variety of indications. Nuvo is a publicly traded, Canadian pharmaceutical company headquartered in Mississauga, Ontario. Nuvo's Pain Group is located in West Chester, Pennsylvania. Its manufacturing facilities are located in Varennes, Quebec and Wanzleben, Germany, and its research and development centers are located in San Diego, California and Leipzig, Germany. For more information, please visit http://www.nuvoresearch.com/
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, 2009. Nuvo disclaims any intention or obligation to update or revise any forward-looking statements whether 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 http://www.sedar.com/
NUVO RESEARCH INC. CONSOLIDATED BALANCE SHEET FOR THE PERIOD ENDED JUNE 30, 2010 As at As at June 30, December 31, 2010 2009 Unaudited Audited (Canadian dollars in thousands) $ $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 32,867 42,102 Accounts receivable 3,735 2,091 Inventories 1,571 2,078 Other current assets 985 445 ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 39,158 46,716 Property, plant and equipment 2,204 1,834 ------------------------------------------------------------------------- TOTAL ASSETS 41,362 48,550 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities 3,276 4,589 Deferred revenue 2,351 2,241 Current portion of capital lease obligations 93 79 Current portion of debentures - 3,038 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 5,720 9,947 Deferred revenue 910 1,080 Capital lease obligations 26 65 ------------------------------------------------------------------------- TOTAL LIABILITIES 6,656 11,092 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common shares 216,707 210,086 Contributed surplus 12,582 12,536 Accumulated other comprehensive income 114 114 Deficit (194,697) (185,278) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 34,706 37,458 ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 41,362 48,550 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD ENDED JUNE 30, 2010 Three months Six months ended June 30, ended June 30, Unaudited 2010 2009 2010 2009 (Canadian dollars in thousands, except per share and share figures) $ $ $ $ ------------------------------------------------------------------------- REVENUE Product sales 3,311 2,075 6,578 4,458 Cost of goods sold 2,063 1,449 4,255 2,583 ------------------------------------------------------------------------- Gross margin on product sales 1,248 626 2,323 1,875 Other revenue Licensing fees 560 560 1,120 1,120 Royalties 188 - 188 - Research and other contract revenue 185 71 409 175 ------------------------------------------------------------------------- 2,181 1,257 4,040 3,170 ------------------------------------------------------------------------- EXPENSES Research and development 2,229 865 4,538 3,821 Selling, general and administrative expenses 2,506 1,900 4,509 3,373 Amortization of property, plant, and equipment 124 148 242 297 Foreign currency (gain) loss 192 (210) 597 (219) Interest expense 3 227 63 473 Interest income (16) (9) (42) (43) ------------------------------------------------------------------------- 5,038 2,921 9,907 7,702 ------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES (2,857) (1,664) (5,867) (4,532) ------------------------------------------------------------------------- Income taxes 5 - 5 - ------------------------------------------------------------------------- Net Loss and total comprehensive loss (2,862) (1,664) (5,872) (4,532) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per common share - basic and diluted (0.01) (0.01) (0.01) (0.01) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Average number of common shares outstanding - basic and diluted (millions) 417.3 352.6 409.1 336.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 2010 Three months Six months ended June 30, ended June 30, Unaudited 2010 2009 2010 2009 (Canadian dollars in thousands) $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss (2,862) (1,664) (5,872) (4,532) Items not involving current cash flows: Amortization 124 148 242 297 Deferred revenue recognized (579) (560) (1,120) (1,120) Stock-based compensation 22 277 47 503 Accretion of interest on debentures - 147 31 295 Unrealized foreign exchange loss (gain) 123 (75) 648 (66) Other 16 (273) 15 (257) ------------------------------------------------------------------------- (3,156) (2,000) (6,009) (4,880) Net change in non-cash working capital 214 (201) (2,136) (510) Deferred proceeds from licensing arrangements, royalty payments and advances on research contracts - 11,318 14 11,341 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,942) 9,117 (8,131) 5,951 ------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisition of property, plant and equipment (370) (148) (604) (203) ------------------------------------------------------------------------- CASH USED IN INVESTING ACTIVITIES (370) (148) (604) (203) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of common shares and warrants, net of related costs 5 3,246 5 5,442 Repayments of long-term debt and capital lease obligations (19) (32) (38) (94) ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (14) 3,214 (33) 5,348 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (61) (99) (467) (55) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net change in cash and cash equivalents during the period (3,387) 12,084 (9,235) 11,041 Cash and cash equivalents, beginning of period 36,254 14,176 42,102 15,219 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 32,867 26,260 32,867 26,260 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid 2 166 55 261 -------------------------------------------------------------------------
Nuvo Research Inc.
CONTACT: about Nuvo, please contact: Media and Investor Relations, Adam
Peeler, The Equicom Group Inc., Tel: (416) 815-0700 x225, email:
apeeler@equicomgroup.com
