MISSISSAUGA, ON, Oct. 27 /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 third quarter ended September 30, 2010.
Key Corporate Developments: -- U.S. launch of Pennsaid progressed well as prescriptions dispensed and the related royalty revenue recognized by Nuvo more than tripled compared to the prior quarter; -- Nuvo's U.S. licensee, Mallinckrodt Inc., a Covidien company, began dosing participants in its Phase 2 clinical study of Pennsaid Gel, a follow-on product to Pennsaid, featuring two times per day dosing (original Pennsaid dosing is four times per day) and anticipated patent protection; -- Completed enrolment of a Phase 2, European clinical trial evaluating the safety and efficacy of WF10 as a treatment for severe allergic rhinitis; -- Continued pursuit of clinical stage pain assets for in-licensing or acquisition; -- The Company advanced development of its lead preclinical pain product candidate. Nuvo anticipates filing an Investigational New Drug application for this product with the United States Food and Drug Administration in 2011; and, -- Concluded the third quarter with $30.9 million in cash and cash equivalents and took steps to reduce operating costs.
"Covidien's sales efforts with Pennsaid gained increasing traction in the third quarter," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research. "Weekly U.S. prescriptions for Pennsaid continued to increase week over week during the quarter, and we are optimistic that this upward trend will continue. Our strong cash position and increasing revenues create opportunities to build Nuvo into a diverse, strong, specialty pharmaceutical company focused in the therapeutic area of pain through product acquisitions and the organic growth of our early stage pain pipeline."
Financial Results: (thousands of Canadian dollars) Pennsaid U.S. Launch
Covidien launched Pennsaid in the U.S. in late April 2010 and although early in the launch, management is encouraged by the continuing growth in uptake. Prescriptions for Pennsaid continued to increase week-over-week during the third quarter exceeding 2,500 per week by the end of September. According to IMS data, 26,600 Pennsaid prescriptions were dispensed in the third quarter, an increase of 250% compared to 7,600 in the second quarter. The data also shows that approximately 1.27 bottles of Pennsaid are dispensed for each prescription.
Operating Results
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended September 30, 2010 increased 20% to $3.9 million compared to $3.2 million for the three months ended September 30, 2009. The increase was primarily attributable to the 2010 U.S. launch of Pennsaid as the Company recorded aggregate revenue of $2.0 million related to sales in the U.S. market: $1.4 million in product sales and $0.6 million in royalty revenue. Revenue from U.S product sales are recorded upon shipment from Nuvo's Varennes manufacturing plant to Covidien's warehouse at the contractually agreed upon price which does not include any royalty revenue payable by Covidien to Nuvo on Pennsaid sales. Nuvo records royalty revenue when Pennsaid is dispensed to the end user in the U.S. (i.e. the patient). The amount of royalty revenue recognized for each bottle dispensed is determined by multiplying the net selling price of a bottle by the royalty rate set out in the U.S. licensing agreement. The net selling price is equal to the gross selling price of Pennsaid less all contractually agreed deductions contained in the U.S. licensing agreement which is typical in the pharmaceutical industry.
Revenue for the nine months ended September 30, 2010 increased by 36% to $12.2 million compared to $9.0 million for the nine months ended September 30, 2009. The increase was primarily attributable to the U.S. launch of Pennsaid as the Company recorded aggregate revenue of $5.1 million related to Pennsaid sales in the U.S. market: $4.3 million in product sales and $0.8 million in royalty revenue.
Gross margin on product sales decreased slightly to $0.9 million for the three months ended September 30, 2010 compared to $1.0 million for the three months ended September 30, 2009.
The decrease in the current period is attributable to a significant decline in margin on WF10 sales which were down more than 60% in the current quarter versus a year ago. For the nine months ended September 30, 2010, gross margin on product sales was $3.2 million compared to $2.9 million for the nine months ended September 30, 2009. The increase in gross margin is primarily attributable to higher Pennsaid sales, partially offset by the weakening of the euro and British pound against the Canadian dollar and the significant decline in WF10 margin.
Total operating expenses, excluding foreign currency gains and losses, for the three and nine months ended September 30, 2010 were $4.8 million and $14.2 million versus $3.9 million and $11.8 million for the three and nine months ended September 30, 2009. The increase in the quarter and nine-month period primarily relates to higher research and development (R&D) expenses and selling, general and administrative expenses (SG&A) offset by lower net interest expense.
R&D expenses were $2.9 million and $7.5 million for the three and nine months ended September 30, 2010, an increase compared to $1.8 million and $5.7 million for the three and nine months ended September 30, 2009. For the quarter, the increase was attributable to: costs incurred in the Immunology Group due to their larger infrastructure versus a year ago and costs of running the allergic rhinitis Phase 2 clinical trial, key additions to the Pain Group team made over the past year and $0.2 million in severance charges. For the nine month period, the increase is primarily attributable to the Immunology Group for the reasons noted above.
SG&A expenses increased to $1.8 million and $6.3 million for the three and nine months ended September 30, 2010 compared to $1.7 million and $5.1 million for the three and nine months ended September 30, 2009. During the quarter, the increase was primarily attributable to consulting, professional and other fees and costs related to the Company's efforts to in-license or acquire clinical stage assets. For the nine months, the increase was primarily attributable to: an increase in consulting, professional and other fees relating to business development activities and an increase in compensation expense.
Net interest income was $58,000 and $37,000 for the three and nine months ended September 30, 2010 compared to net interest expense of $147,000 and $577,000 for the three and nine months ended September 30, 2009. The decrease in both periods was 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 $2.3 million and $8.1 million for the three and nine months ended September 30, 2010 compared to $2.7 million and $7.3 million for the three and nine months ended September 30, 2009. The smaller net loss in the quarter was attributable to the inclusion of revenue earned on U.S. sales of Pennsaid since its launch in April 2010, foreign exchange gains and net interest income compared to foreign exchange losses and net interest expense in the comparative period, offset partially by higher R&D expenses. For the nine month period, the larger net loss is attributable to higher SG&A and R&D expenses that were only partially offset by a higher gross margin, royalty revenue and net interest income versus net interest expense in the comparative period.
Cash and cash equivalents were $30.9 million as at September 30, 2010, a modest decline of only $2.0 million since June 30, 2010.
Cash used in operating activities was $1.9 million for the three months ended September 30, 2010 compared to $2.6 million for the three months ended September 30, 2009, primarily as a result of the $1.2 million royalty payment from Covidien received during the quarter, offset somewhat by an increase in inventory levels as the Company could not ship product to Greece in September due to a strike by truck drivers. For the nine months ended September 30, 2010, cash used in operating activities was $10.1 million compared to cash provided by operating activities of $3.4 million for the nine months ended September 30, 2009. This change was due to the $11.3 million Upfront Payment received from Covidien in 2009, a larger investment in non-cash working capital during 2010 to support Pennsaid's U.S. launch and a higher net loss.
Net cash used in investing activities totaled $192,000 and $796,000 for the three and nine months ended September 30, 2010 compared to $130,000 and $333,000 for the three and nine months ended September 30, 2009. The additions in the quarter primarily related to new IT infrastructure at the Company's North American facilities. The additions in the nine-month period primarily relate to production automation and lab equipment acquired for the Company's Pennsaid manufacturing facility.
Net cash used in financing activities totaled $19,000 and $52,000 for the three and nine months ended September 30, 2010 and related primarily to scheduled capital lease payments. For the three and nine months ended September 30, 2009, cash provided by financing activities totaled $6.1 million and $11.4 million and was primarily attributed to proceeds received upon the exercise of warrants as part of, and subsequent to, the early warrant incentive program.
Management will host a conference call to discuss the third quarter results on October 28, 2010 at 8:30 am ET. Following management's presentation, there will be a question and answer session, at which time the operator will direct participants as 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 until Thursday, November 4, 2010 by calling 416-849-0833 or 1-800-642-1687, reference number 19403260.
A live audio webcast of the conference call will be available through http://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 needed to hear the webcast.
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, the United States and several European countries. Pennsaid was approved for marketing in the U.S. by the United States Food and Drug Administration on November 4, 2009 and is being sold throughout the United States by Nuvo's licensing partner, Mallinckrodt Inc., a Covidien company. Nuvo intends to create a portfolio of products through internal research and development and by in-licensing and acquisition. 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 SHEETS TOTAL CURRENT ASSETS TOTAL ASSETS TOTAL CURRENT LIABILITIES Deferred revenue Capital lease obligations TOTAL LIABILITIES SHAREHOLDERS' EQUITY TOTAL SHAREHOLDERS' EQUITY NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS 2010 2010 $ $ $ $ REVENUE Net loss per common share - basic and diluted
Average number of common shares outstanding - basic and diluted (millions)
NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited 2010 2009 2010 2009 $ $ $ $ CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES CASH USED IN INVESTING ACTIVITIES CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES CASH AND CASH EQUIVALENTS, END OF PERIOD Interest paid
Nuvo Research Inc.
CONTACT:
about Nuvo, please contact:
Media and Investor
Relations
Adam Peeler
The Equicom Group Inc.
Tel: (416)
815-0700 x225
email: href="mailto:apeeler@equicomgroup.com">apeeler@equicomgroup.com
