NUVO RESEARCH ANNOUNCES 2010 FOURTH QUARTER AND YEAR-END FINANCIAL RESULTS
MISSISSAUGA, ON, Feb. 24 /PRNewswire-FirstCall/ – Nuvo Research Inc. (TSX: NRI), a pharmaceutical company dedicated to building a portfolio of products
primarily for the 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,
2010.
Fourth Quarter and Recent Corporate Developments:
-- U.S. launch of Pennsaid continued as prescriptions dispensed
increased by 20% compared to the third quarter of 2010;
-- Nuvo's U.S. licensee, Mallinckrodt Inc., a Covidien (NYSE: COV)
("Covidien") company, completed enrolment subsequent to quarter
end for 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. The trial remains on track to
conclude in the first half of 2011;
-- Nuvo's European Phase 2 clinical trial evaluating WF10 as a
treatment for severe allergic rhinitis met its primary
endpoint. These results support the Company's view that WF10
has the potential to become an effective treatment for patients
with certain autoimmune conditions, such as severe allergic
rhinitis;
-- Discussions continued for possible in-licensing or acquisition
of clinical stage pain assets;
-- The development of its lead preclinical pain product candidate
advanced to the point where Nuvo anticipates filing an
Investigational New Drug application for this product with the
United States Food and Drug Administration in 2011;
-- Nuvo's U.S. subsidiary was awarded approximately US$1.3 million
of grants under the U.S. Government's Qualifying Therapeutic
Discovery Project (QTDP) program. The grants relate to 2009 and
2010 research programs for topical and transdermal formulations
being developed by the Company; and,
-- Nuvo concluded the fourth quarter with $28.3 million in cash
and cash equivalents and implemented operating cost reductions
by transitioning the Company's San Diego-based research and
development capabilities to Nuvo's facilities in Varennes,
Québec.
“We are very pleased with the growth of Pennsaid U.S. prescriptions
filled in the fourth quarter,” said Dan Chicoine, Chairman and Co-Chief
Executive Officer of Nuvo Research. “While the level of Pennsaid
prescriptions in the most recent weeks has remained similar to those
seen in the fourth quarter of 2010, we believe that as Covidien secures
reimbursement arrangements with private and public insurers, most
importantly Medicare, prescription growth will accelerate.”
Financial Results:
(thousands of Canadian dollars)
Three months Three months Twelve months Twelve months
ended ended ended ended
December31,2010 December 31, December 31, December 31,
2009 2010 2009
$ $ $ $
Revenue 4,837 29,660 17,021 38,647
Net Income (1,568) 22,275 (9,693) 15,018
(Loss)
Pennsaid U.S. Launch
Covidien launched Pennsaid in the U.S. in late April 2010. According to
IMS Health, a provider of prescription data, approximately 32,400
Pennsaid prescriptions were dispensed in the fourth quarter and
approximately 67,000 in 2010. The prescriptions dispensed in the
quarter represent a 20% increase over the previous quarter. The data
also shows that approximately 1.29 bottles of Pennsaid are dispensed
for each prescription.Â
Operating Results
Revenue, consisting of product sales, royalties, license fee revenue and
research and other contract revenue for the three months ended December
31, 2010 was $4.8 million compared to $29.7 million for the three
months ended December 31, 2009. However, the fourth quarter of 2009
included $27.3 million in-licensing fee revenue earned under the U.S.
licensing agreement with Covidien (U.S. Licensing Agreement) that
consisted of the $11.3 million initial payment and the $16.0 million
FDA approval payment. Excluding these one-time payments, aggregate
revenue in the quarter actually increased by $2.4 million primarily
driven by revenues generated from the U.S. market consisting of royalty
revenue of $0.9 million and product sales of $1.5 million.
Revenue for the year ended December 31, 2010 was $17.0 million compared
to $38.6 million for the year ended December 31, 2009. Excluding the
one-time milestone payments, revenue increased by approximately 50% or
$5.7 million compared to 2009,primarily due to revenue of $7.7 million
related tosales of Pennsaid in the U.S. market, $6.0 million in product
sales and $1.7 million in royalty revenue. These sales were partially
offset by lower product sales in Canada and Europe.
Gross margin on product sales increased to $0.9 million for the three
months ended December 31, 2010 compared to $0.3 million for the three
months ended December 31, 2009. The increase in the current period was
attributable to a significant increase in Pennsaid product sales. For
the year, gross margin on product sales was $4.0 million compared to
$2.9 million for the year ended December 31, 2009. The increase in
gross margin was primarily attributable to higher Pennsaid sales,
partially offset by the weakening of the euro which reducedreported
European product sales.Â
Total operating expenses, excluding foreign currency gains and losses,
for the three months ended December 31, 2010 were $3.5 millionversus
$5.5 million for the three months ended December 31, 2009. Included in
the fourth quarter of 2010,was a $1.3 million grant awarded under the
U.S. Government’s Qualifying Therapeutic Discovery Project (QTDP)
program and the fourth quarter of 2009 included $0.6 million of costs
related to the FDA approval of Pennsaid in the U.S. Excluding these
one-time items, total operating expenses decreased slightly to $4.8
million in the fourth quarter of 2010 compared to $4.9 million in the
fourth quarter of 2009. Total operating expenses, excluding foreign
currency losses, for the year ended December 31, 2010 increased
slightly to $17.4 million compared to $17.0 million for the year ended
December 31, 2009. The increase from 2009 related to higher SG&Aand
R&D expenses and amortization expense, offset by net interest income in
the current year compared to net interest expense in the comparative
period.Â
R&D expenses were $1.6 million for the three months ended December 31,
2010compared to $3.1 million for the three months ended December 31,
2009. The decrease in the quarter related to the $1.3 million grant
awarded under the U.S. Government’s QTDP program that was recorded as a
reduction to R&D expenses. In 2010, R&D was $9.0 million compared to
$8.7 million in 2009. The increase for the year was attributable to:
the costs of running the Phase 2 allergic rhinitis trial in the
Immunology Group including the necessary infrastructure, key staff
additions to the Pain Group and costs related to reducing the size of
the formulation development team in San Diego. These increases were
substantially offset by the $1.3 million QTDP grant.
SG&A expenses declined to $1.9 million for the three months ended
December 31, 2010 compared to $2.3 million for the three months ended
December 31, 2009. During the quarter, the decrease related to lower
compensation expense and severance costs. For the year ended December
31, 2010, SG&A expenses increased to $8.2 million compared to $7.4
million for the year ended December 31, 2009. The increase was
primarily attributable to consulting and professional fees related to
the Company’s efforts to in-license and acquire clinical stage assets.Â
Net interest income was $58,000and $95,000 for the three months and year
ended December 31, 2010 compared to net interest expense of $0.2
million and $0.7 million for the three months and year ended December
31, 2009. The improvement in both periodswas 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 the first quarter of 2010.
Net loss for the quarter was $1.6 million compared to income of $22.3
million for the quarter ended December 31, 2009. The decrease inincome
of $23.9 million was primarily related to the $27.3 million in
licensing fee revenue from the U.S. Licensing Agreement, offset
somewhat by the QTDP grant, higher margin and lower operating costs.For
the year ended December 31, 2010, the net loss was $9.7 million
compared to net income of $15.0 million for the year ended December 31,
2009.Â
Cash and cash equivalents were $28.3 million as at December 31, 2010.Â
Cash used in operating activities of $2.3 million was significantly
lower than the cash provided by operating activities of $12.9 million
for the three-month period ended December 31, 2009 due to the receipt
of the $16.0 million FDA approval payment from Covidien in the fourth
quarter of 2009. Overall cash used in operating activities was $12.4
million for the year ended December 31, 2010 compared to cash provided
by operating activities of $16.3 million for the year ended December
31, 2009 almost entirely attributable to the two payments received
under the U.S. Licensing Agreement in 2009.
Net cash used in investing activities totaled $46,000 for the three
months ended December 31, 2010 compared to $58,000 in the three months
ended December 31, 2009. Net cash used in investing activities totaled
$842,000 for the year ended December 31, 2010 compared to $391,000 for
the year ended December 31, 2009 and in each period was entirely
attributable to the acquisition of property, plant and equipment. In
2010, capital expenditures related primarily to production automation
and lab equipment acquired for the Company’s Pennsaid manufacturing
facility.Â
Net cash provided by financing activities totaled $59,000 for the three
months ended December 31, 2010, compared to $16,000 for the three
months ended December 31, 2009. For the year, net cash provided by
financing activities totaled $7,000 compared to $11.5 million in the
prior year. In 2010, the cash provided by financing activities related
primarily to $76,000 in employee contributions under the Share Purchase
Plan, offset by regularly scheduled capital lease payments. In 2009,
net cash provided by financing activities was primarily attributable 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 fourth quarter and
year-end results on February 25, 2011 at 8:30 am EST. 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 Friday, March 4,
2010 by calling 416-849-0833 or 1-800-642-1687, reference number
39060258.
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 needed to
hear the webcast.
About Nuvo Research Inc.
Nuvo is a publicly traded, Canadian pharmaceutical company headquartered
in Mississauga, Ontario.The Company is dedicated to 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 lead pain product is Pennsaid, a topical
non-steroidal anti-inflammatory drug (NSAID), 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. Through its subsidiary Nuvo Research, AG based in Leipzig,
Germany, the Company is also developing the compound WF10, for the
treatment of immune related diseases. For more information, please
visit www.nuvoresearch.com.
For more information about Nuvo, please contact:
Media and Investor Relations
Adam Peeler
The Equicom Group Inc.
Tel:Â (416) 815-0700 x225
email: apeeler@equicomgroup.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, 2010.
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 www.sedar.com
NUVO RESEARCH INC.
CONSOLIDATED BALANCE SHEETS
As at As at
December 31, 2010 December 31, 2009
(Canadian dollars in thousands) $ $
ASSETS
CURRENT
Cash and cash equivalents 28,269 42,102
Accounts receivable 3,100 2,086
Inventories 1,767 2,078
Other current assets 2,143 450
TOTAL CURRENT ASSETS 35,279 46,716
Property, plant and equipment 2,064 1,834
TOTAL ASSETS 37,343 48,550
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT
Accounts payable and accrued
liabilities 4,203 4,589
Deferred revenue 1,056 2,241
Current portion of capital lease
obligations 63 79
Debentures - 3,038
TOTAL CURRENT LIABILITIES 5,322 9,947
Deferred revenue 739 1,080
Capital lease obligations 11 65
TOTAL LIABILITIES 6,072 11,092
SHAREHOLDERS' EQUITY
Common shares 216,864 210,086
Contributed surplus 12,811 12,536
Accumulated other comprehensive
income 114 114
Deficit (198,518) (185,278)
TOTAL SHAREHOLDERS' EQUITY 31,271 37,458
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 37,343 48,550
NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS)
Three months Twelve months
ended December 31, ended December 31,
2010 2009 2010 2009
(unaudited) (audited)
(Canadian
dollars in
thousands,
except per
share and
share figures) $ $ $ $
REVENUE
Product sales 3,305 1,770 12,484 8,795
Cost of goods
sold 2,433 1,515 8,521 5,902
Gross margin
on product
sales 872 255 3,963 2,893
Other revenue
Licensing fees 561 27,873 2,241 29,553
Royalties 871 - 1,707 -
Research and
other contract
revenue 100 17 589 299
2,404 28,145 8,500 32,745
EXPENSES
Research and
development 1,565 3,062 8,966 8,717
Selling,
general and
administrative
expenses 1,901 2,259 8,232 7,377
Amortization
of property
and equipment 139 7 306 208
Foreign
currency loss 403 383 741 689
Interest
expense 2 173 68 815
Interest
income (60) (14) (163) (79)
3,950 5,870 18,150 17,727
Income (loss)
before income
taxes (1,546) 22,275 (9,650) 15,018
Income taxes 22 - 43 -
NET INCOME
(LOSS) AND
TOTAL
COMPREHENSIVE
INCOME (LOSS) (1,568) 22,275 (9,693) 15,018
Net income
(loss)
percommon
share
basic $(0.00) $0.06 $(0.02) $0.04
diluted $(0.00) $0.05 $(0.02) $0.04
Average number
of common
shares
outstanding
(millions)
basic 417.4 391.4 413.2 363.4
NUVO RESEARCH INC.
CONSOLIDATEDSTATEMENTS OF CASH FLOWS
Three months Twelve months
ended December 31, ended December 31,
2010 2009 2010 2009
(unaudited) (audited)
(Canadian
dollars in
thousands) $ $ $ $
OPERATING
ACTIVITIES
Net income
(loss) (1,568) 22,275 (9,693) 15,018
Items not
involving
current cash
flows:
Amortization 230 97 620 547
Deferred
license
revenue
recognized (561) (561) (2,241) (2,241)
Royalties
earned in
excess of
collections (577) - (179) -
Deferred
proceeds from
licensing
arrangements - (11,341) - -
Stock-based
compensation 175 176 265 823
Accretion of
interest on
debentures - 126 31 538
Unrealized
foreign
exchange loss 319 118 777 488
Other - (168) 11 (75)
(1,982) 10,722 (10,409) 15,098
Net change in
non-cash
working capital (345) 2,159 (1,969) 1,161
CASH PROVIDED
BY (USED IN)
OPERATING
ACTIVITIES (2,327) 12,881 (12,378) 16,259
INVESTING
ACTIVITIES
Acquisition of
property, plant
and equipment (46) (58) (842) (391)
CASH USED IN
INVESTING
ACTIVITIES (46) (58) (842) (391)
FINANCING
ACTIVITIES
Issuance of
common shares
and warrants,
net of related
costs 79 120 84 11,704
Repayments of
long-term debt
and capital
lease
obligations (20) (104) (77) (243)
CASH PROVIDED
BY FINANCING
ACTIVITIES 59 16 7 11,461
Effect of
exchange rate
changes on cash
and cash
equivalents (302) (226) (620) (446)
Net change in
cash and cash
equivalents
during the
period (2,616) 12,613 (13,833) 26,883
Cash and cash
equivalents,
beginning of
the period 30,885 29,489 42,102 15,219
CASH AND CASH
EQUIVALENTS,
END OF YEAR 28,269 42,102 28,269 42,102
Interest paid 2 92 60 363
SOURCE Nuvo Research Inc.