MISSISSAUGA, ON, July 31, 2013 /PRNewswire/ - 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
second quarter ended June 30,
2013.
Second Quarter and Recent Corporate
Developments:
- In July 2013, Mallinckrodt plc, Nuvo's U.S. marketing partner for
Pennsaid® and Pennsaid 2%, advised Nuvo that it
successfully completed the pharmacokinetic study required by the
U.S. Food and Drug Administration (FDA) in the FDA's March 2013 Pennsaid 2% Complete Response Letter
(CRL) to Mallinckrodt and that it
expects to submit the study results with its response to the CRL in
the third quarter of 2013 and receive a formal response from FDA
six months from the date of the submission;
- The U.S. Patent Office granted a WF10 U.S. Patent for the
treatment of allergic asthma, allergic rhinitis and atopic
dermatitis creating a potential commercial opportunity for the
existing formulation of WF10;
- In July 2013, the Company sold
the exclusive rights to market and sell Synera in the U.S. for its
current indication to Galen US Incorporated (Galen) for
US$4.5 million received on closing,
royalties of 10% of net sales and sales milestones of US$5.0 million upon gross annual U.S. sales
reaching US$25.0 million and an
additional US$5.0 million upon gross
annual U.S. sales reaching US$50.0
million (Synera U.S. Licensing Agreement);
- In July 2013, the Company amended
its loan arrangements with Paladin Labs Inc., whereby Nuvo drew
down the second $4.0 million loan
tranche in July 2013 and may draw an
additional third tranche of $4.0
million upon the achievement of predefined milestones;
- The Company completed a share consolidation on the basis of 65
pre-Consolidation common shares for one post-Consolidation common
share reducing the number of common shares outstanding to 8.7
million;
- The European Patent Office issued a notice of Intention to
Grant an E.U. Patent covering the Pennsaid 2% formulation and its
use; and
- Galderma Pharma S.A., the Company's global marketing partner
for Pliaglis, launched the commercial marketing and sale of
Pliaglis in the E.U. in April 2013 at
the Anti-Aging Medicine World Congress & Medispa in
Monaco.
Pennsaid U.S.
According to IMS Health, a provider of dispensed prescription data,
during the second quarter of 2013, U.S. prescriptions of Pennsaid
were 36,000 with an average 1.36 bottles of Pennsaid dispensed per
script. This represents a decrease of approximately 16% over
the number of prescriptions in the first quarter of 2013.
Operating Results
Revenue, consisting of product sales, royalties, license fee
revenue and research and other contract revenue for the three
months ended June 30, 2013 was
$3.3 million compared to $11.4 million for the three months ended
June 30, 2012. The decrease was
attributable to a $5.4 million
decrease in licensing fee revenue primarily due to the $5.1 million in milestone payments earned by the
Company upon the marketing approval of Pliaglis in the first two
European countries in the comparative period and a decrease in
Pennsaid royalty revenue and product sales in the U.S. as the prior
year revenue included significant shipments to the U.S. due to the
temporary shortage of Voltaren Gel. Total revenue for the six
months ended June 30, 2013 was
$5.6 million versus $17.6 million a year ago.
For the three months ended June 30, 2013, the Company reported gross margin
on product sales of $150,000 compared
to $0.8 million for the comparative
period in 2012. The decrease in gross margin was directly
attributable to a significant decrease in Pennsaid produced and
sold by the Company's manufacturing facility. For the six
months ended June 30, 2013, the
Company reported a negative gross margin of $218,000, compared to a positive gross margin of
$1.6 million for the comparative
period in 2012.
Total operating expenses for the three and six
months ended June 30, 2013 were
$4.1 million and $8.5 million compared to $5.6 million and $11.9
million for the three and six months ended June 30, 2012. The decrease in operating
expenses was primarily due to lower sales and marketing (S&M)
costs.
Research and development (R&D) expenses
decreased to $1.5 million for the
three months ended June 30, 2013
compared to $2.0 million for the
three months ended June 30, 2012. The
decrease related to lower external drug spending primarily on
Synera and cost savings from the closure of its office in
Salt Lake City (SLC).
R&D expenses decreased to $3.4
million for the six months ended June
30, 2013, compared to $3.7
million for the six months ended June
30, 2012.
S&M expenses were $0.2 million and $0.3
million for the three and six months ended June 30, 2013 compared with $1.4 million and $3.4
million for the comparative periods in 2012. The
S&M expense reduction relates to the U.S. marketing costs for
Synera in the comparative period during which the Company launched
Synera in the U.S. In August
2012, the Company refocused its internal resources on large
national accounts and accordingly, reduced its sales force.
Subsequent to the quarter, the Company sold the U.S. rights to
Synera to Galen.
General and administrative (G&A) expenses
increased to $2.3 million for the
three months ended June 30, 2013
compared to $2.2 million for the
three months ended June 30, 2012. The
slight increase in G&A expenses related to increased
amortization expense on the intangible assets related to Pliaglis
and the heated lidocaine/tetracaine patch, as well as transaction
costs related to the Synera U.S. Licensing Agreement and the
amendment to the Paladin Loan. Partially offsetting these
increases was a reduction in operating costs related to the closing
of the Company's office in SLC. G&A expenses decreased to
$4.6 million for the six months ended
June 30, 2013 compared to
$4.8 million for the six months ended
June 30, 2012.
Net loss for the three months ended June 30, 2013 was $2.2
million versus net income of $4.0
million for the three months ended June 30, 2012. The increase in net loss was
attributable to lower revenue that more than offset the decrease in
operating expenses. Net loss for the six months ended
June 30, 2013 was $5.5 million compared to $0.4 million for the six months ended
June 30, 2012.
Cash and cash equivalents were $7.6 million as at June
30, 2013 compared to $12.1
million as at December 31,
2012. Subsequent to the quarter, the Company received
US$4.5 million from Galen under the
terms of the Synera U.S. Licensing Agreement and drew the second
$4.0 million loan tranche from
Paladin.
Cash used in operating activities for the three
months ended June 30, 2013 was
$2.0 million compared to $1.0 million for the three months ended
June 30, 2012. The increase in cash
used in operations that was related to the increase in net loss was
partially offset by a reduced investment in non-cash working
capital. For the six month period, the cash used in operating
activities was $3.8 million versus
$4.4 million a year ago.
Net cash used in financing activities totaled
$0.5 million for the three months
ended June 30, 2013 compared to net
cash provided by financing activities of $3.8 million for the three months ended
June 30, 2012. The cash used in
the quarter was for repayments of the Company's finance and lease
obligations. Net cash used in financing activities totaled
$0.9 million for the six months ended
June 30, 2013, compared to
$3.9 million of cash provided by
financing activities in the prior period.
The number of common shares outstanding as at
June 30, 2013 was 8,745,828.
About Nuvo Research Inc.
Nuvo 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. The Company's product portfolio includes
Pennsaid®, Pliaglis and a heated lidocaine/tetracaine
patch (HLT patch). Pennsaid, a topical non-steroidal
anti-inflammatory drug (NSAID), is used to treat the signs and
symptoms of osteoarthritis of the knee(s). Pennsaid is sold
in the U.S. by Mallinckrodt plc, in
Canada by Paladin Labs Inc. and in
several European countries. Pliaglis is a topical local
anesthetic cream which provides topical local analgesia for
superficial dermatological procedures. The Company has
licensed worldwide marketing rights to Pliaglis to Galderma Pharma
S.A., a global pharmaceutical company specialized in
dermatology. Galderma launched the marketing and sale of
Pliaglis in the U.S. in March of 2013 and in the E.U. in April of
2013. The HLT patch is a topical patch that combines
lidocaine, tetracaine and heat and is approved in the U.S. to
provide local dermal analgesia for superficial venous access and
superficial dermatological procedures and in Europe, for surface anaesthesia of normal
intact skin. Nuvo's licensing partner, Galen US Incorporated
markets the HLT patch (under the name Synera) in the U.S. In
Europe, Nuvo's licensing partner, Eurocept International B.V., has
initiated a pan-European launch of the HLT patch (under the name
Rapydan). The Company is also developing WF10, for the
treatment of immune related diseases.
Forward-Looking Statements
Certain statements in this news release constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking statements include, but are
not limited to, statements concerning the Company's future
objectives, strategies to achieve those objectives, as well as
statements with respect to management's beliefs, plans, estimates,
and intentions, and similar statements concerning anticipated
future events, results, circumstances, performance or expectations
that are not historical facts. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "outlook", "objective", "may", "will",
"expect", "intend", "estimate", "anticipate", "believe", "should",
"plans" or "continue", or similar expressions suggesting future
outcomes or events. Such forward-looking statements reflect
management's current beliefs and are based on information currently
available to management. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those contemplated by such statements.
Factors that could cause such differences include the need for
additional financing, the current economic environment, dependence
on sales and marketing partnerships, competitive developments, as
well as other risk factors included in the Company's annual
information form dated March 27, 2013
under the heading "Risks Factors" and as described from time to
time in the reports and disclosure documents filed by the Company
with Canadian securities regulatory agencies and commissions.
This list is not exhaustive of the factors that may impact the
Company's forward-looking statements. These and other factors
should be considered carefully and readers should not place undue
reliance on the Company's forward-looking statements. As a
result of the foregoing and other factors, no assurance can be
given as to any such future results, levels of activity or
achievements and neither the Company nor any other person assumes
responsibility for the accuracy and completeness of these
forward-looking statements. The factors underlying current
expectations are dynamic and subject to change. Although the
forward-looking information contained in this news release is based
upon what management believes are reasonable assumptions, there can
be no assurance that actual results will be consistent with these
forward-looking statements. Certain statements included in
this news release may be considered "financial outlook" for
purposes of applicable securities laws, and such financial outlook
may not be appropriate for purposes other than this news
release. All forward-looking statements in this news release
are qualified by these cautionary statements. The
forward-looking statements contained herein are made as of the date
of this news release and except as required by applicable law, the
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL
POSITION |
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
|
|
|
As at June 30,
2013 |
|
|
|
As at December 31,
2012 |
(Canadian dollars in thousands) |
|
|
|
|
|
|
$ |
|
|
|
$ |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
7,563 |
|
|
|
12,149 |
Accounts receivable |
|
|
|
|
|
|
2,404 |
|
|
|
3,771 |
Inventories |
|
|
|
|
|
|
1,431 |
|
|
|
1,156 |
Other current assets |
|
|
|
|
|
|
905 |
|
|
|
1,056 |
TOTAL CURRENT ASSETS |
|
|
|
|
|
|
12,303 |
|
|
|
18,132 |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
1,468 |
|
|
|
1,614 |
Intangible assets |
|
|
|
|
|
|
8,748 |
|
|
|
8,739 |
TOTAL ASSETS |
|
|
|
|
|
|
22,519 |
|
|
|
28,485 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
|
|
3,009 |
|
|
|
3,360 |
Current portion of deferred revenue |
|
|
|
|
|
|
228 |
|
|
|
341 |
Current portion of finance lease
and other obligations |
|
|
|
|
|
|
2,095 |
|
|
|
1,900 |
TOTAL CURRENT LIABILITIES |
|
|
|
|
|
|
5,332 |
|
|
|
5,601 |
Deferred revenue |
|
|
|
|
|
|
- |
|
|
|
57 |
Finance lease and other obligations |
|
|
|
|
|
|
355 |
|
|
|
1,358 |
TOTAL LIABILITIES |
|
|
|
|
|
|
5,687 |
|
|
|
7,016 |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Common shares |
|
|
|
|
|
|
228,772 |
|
|
|
228,705 |
Contributed surplus |
|
|
|
|
|
|
13,613 |
|
|
|
13,495 |
Accumulated other comprehensive income |
|
|
|
|
|
|
1,088 |
|
|
|
420 |
Deficit |
|
|
|
|
|
|
(226,641) |
|
|
|
(221,151) |
TOTAL EQUITY |
|
|
|
|
|
|
16,832 |
|
|
|
21,469 |
TOTAL LIABILITIES AND EQUITY |
|
|
|
|
|
|
22,519 |
|
|
|
28,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(LOSS) AND COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
Three Months
Ended
June 30, |
|
|
Six Months
Ended
June 30, |
|
|
|
|
2013 |
2012
(restated) |
|
|
2013 |
|
|
2012
(restated) |
(Canadian dollars in thousands, except per share
and share figures) |
|
|
|
$ |
$ |
|
|
$ |
|
|
$ |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
|
1,670 |
3,040 |
|
|
2,274 |
|
|
5,769 |
Cost of goods sold |
|
|
|
1,520 |
2,197 |
|
|
2,492 |
|
|
4,178 |
Gross margin on product sales |
|
|
|
150 |
843 |
|
|
(218) |
|
|
1,591 |
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
|
|
1,481 |
2,723 |
|
|
2,865 |
|
|
5,650 |
Licensing fees |
|
|
|
85 |
5,532 |
|
|
170 |
|
|
6,068 |
Research and other contract revenue |
|
|
|
84 |
62 |
|
|
262 |
|
|
99 |
Net revenue |
|
|
|
1,800 |
9,160 |
|
|
3,079 |
|
|
13,408 |
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
|
|
1,508 |
1,961 |
|
|
3,380 |
|
|
3,657 |
Sales and marketing expenses |
|
|
|
162 |
1,392 |
|
|
339 |
|
|
3,394 |
General and administrative expenses |
|
|
|
2,349 |
2,213 |
|
|
4,642 |
|
|
4,806 |
Interest expense |
|
|
|
99 |
80 |
|
|
211 |
|
|
100 |
Interest income |
|
|
|
(14) |
(5) |
|
|
(24) |
|
|
(10) |
Total operating expenses |
|
|
|
4,104 |
5,641 |
|
|
8,548 |
|
|
11,947 |
OTHER INCOME |
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on ZARS contingent consideration |
|
|
|
- |
(690) |
|
|
- |
|
|
1,610 |
Foreign currency loss (gain) |
|
|
|
(113) |
127 |
|
|
(36) |
|
|
110 |
Net income (loss) before income taxes |
|
|
|
(2,191) |
4,082 |
|
|
(5,433) |
|
|
(259) |
Income taxes |
|
|
|
29 |
60 |
|
|
57 |
|
|
126 |
NET INCOME (LOSS) |
|
|
|
(2,220) |
4,022 |
|
|
(5,490) |
|
|
(385) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on translation of
foreign operations |
|
|
|
350 |
520 |
|
|
668 |
|
|
(2) |
TOTAL COMPREHENSIVE INCOME (LOSS) |
|
|
|
(1,870) |
4,542 |
|
|
(4,822) |
|
|
(387) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
|
(0.25) |
0.46 |
|
|
(0.63) |
|
|
(0.04) |
Average number of common shares
outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
8,746 |
8,732 |
|
|
8,746 |
|
|
8,730 |
diluted |
|
|
|
8,746 |
8,779 |
|
|
8,746 |
|
|
8,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
Three months
ended
June 30 |
|
|
Six months
ended
June 30 |
|
|
|
|
2013 |
2012
(restated) |
|
|
2013 |
|
|
2012
(restated) |
(Canadian dollars in thousands) |
|
|
|
$ |
$ |
|
|
$ |
|
|
$ |
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
(2,220) |
4,022 |
|
|
(5,490) |
|
|
(385) |
Items not involving current cash
flows: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on ZARS contingent
consideration |
|
|
|
- |
(690) |
|
|
- |
|
|
1,610 |
|
Depreciation and amortization |
|
|
|
454 |
163 |
|
|
702 |
|
|
363 |
|
Deferred license revenue
recognized |
|
|
|
(86) |
(386) |
|
|
(171) |
|
|
(922) |
|
Deferred royalty revenue, net of
royalties earned |
|
|
|
- |
(239) |
|
|
- |
|
|
(98) |
|
Stock-based compensation |
|
|
|
(37) |
130 |
|
|
103 |
|
|
489 |
|
Unrealized foreign exchange (gain)
loss |
|
|
|
(128) |
108 |
|
|
20 |
|
|
(21) |
|
Interest and accretion of long-term
other obligations |
|
|
|
16 |
78 |
|
|
33 |
|
|
97 |
|
Other |
|
|
|
(6) |
(4) |
|
|
(11) |
|
|
16 |
|
|
|
|
(2,007) |
3,182 |
|
|
(4,814) |
|
|
1,149 |
Net change in non-cash working
capital |
|
|
|
(22) |
(4,136) |
|
|
1,063 |
|
|
(5,572) |
CASH USED IN OPERATING
ACTIVITIES |
|
|
|
(2,029) |
(954) |
|
|
(3,751) |
|
|
(4,423) |
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and
equipment |
|
|
|
(38) |
(8) |
|
|
(73) |
|
|
(15) |
CASH USED IN INVESTING
ACTIVITIES |
|
|
|
(38) |
(8) |
|
|
(73) |
|
|
(15) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from other obligations |
|
|
|
- |
4,000 |
|
|
- |
|
|
4,000 |
Repayment of finance lease and other
obligations |
|
|
|
(484) |
(156) |
|
|
(865) |
|
|
(169) |
Issuance of common shares |
|
|
|
- |
- |
|
|
- |
|
|
22 |
CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES |
|
|
|
(484) |
3,844 |
|
|
(865) |
|
|
3,853 |
Effect of exchange
rate changes on cash and cash equivalents |
|
|
|
122 |
(45) |
|
|
103 |
|
|
(43) |
Net change in cash and cash
equivalents during the period |
|
|
|
(2,429) |
2,837 |
|
|
(4,586) |
|
|
(628) |
Cash and cash equivalents, beginning
of period |
|
|
|
9,992 |
11,259 |
|
|
12,149 |
|
|
14,724 |
CASH AND CASH EQUIVALENTS, END OF
PERIOD |
|
|
|
7,563 |
14,096 |
|
|
7,563 |
|
|
14,096 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
89 |
- |
|
|
189 |
|
|
- |
Interest received |
|
|
|
15 |
4 |
|
|
20 |
|
|
15 |
Income taxes paid |
|
|
|
28 |
69 |
|
|
48 |
|
|
106 |
SOURCE Nuvo Research Inc.