MISSISSAUGA,
ON, Oct. 30, 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 third quarter ended September 30, 2013.
Third Quarter and Recent Corporate
Developments:
- 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 (Galen Upfront
Payment) received on closing, royalties of 10% of net sales and
sales milestone payments 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;
- In July 2013, the Company amended
its loan arrangements with Paladin Labs Inc.; whereby, the Company
drew upon the second $4.0 million
loan tranche and may draw an additional third tranche of
$4.0 million upon the achievement of
predefined milestones (Amended Paladin Debt);
- In August 2013, Mallinckrodt Inc.
(Mallinckrodt), the Company's U.S.
marketing licensee for Pennsaid® and Pennsaid 2%,
advised Nuvo that the U.S. Food and Drug Administration (FDA) had
accepted for filing and review the New Drug Application (NDA) for
Pennsaid 2%, submitted by Mallinckrodt
on August 7, 2013. The FDA
indicated to Mallinckrodt that it
expects to respond to the NDA by February 7,
2014;
- In August 2013, the Company
commenced legal action against Mallinckrodt asserting that it had breached its
contractual obligations to Nuvo as set out in a Licensing Agreement
pursuant to which Nuvo licensed to Mallinckrodt the rights to market and sell Pennsaid
and Pennsaid 2% in the U.S. The Company is seeking damages of
not less than $100M and a declaration
that it is entitled to terminate the Licensing Agreement which
would result in the rights to market and sell Pennsaid and/or
Pennsaid 2% in the U.S. reverting to the Company. The Company has
not terminated the Licensing Agreement which continues pending the
Court's decision; and
- In October 2013, Galderma Pharma
S.A. (Galderma), the Company's global marketing partner for
Pliaglis, received approval for the marketing and sale of Pliaglis
in Brazil which entitles the
Company to a US$2.0 million milestone
payment (Pliaglis Milestone Payment) that it expects to receive in
early 2014.
Pennsaid U.S.
According to IMS Health, a provider of dispensed prescription data,
during the third quarter of 2013, U.S. prescriptions of Pennsaid
were 34,000 with an average 1.30 bottles of Pennsaid dispensed per
script. This represents a decrease of approximately 6% over
the number of prescriptions in the second 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 September 30, 2013 was
$9.1 million compared to $3.5 million for the three months ended
September 30, 2012. The
significant increase in the quarter was attributable to the Galen
Upfront Payment and the Pliaglis Milestone Payment. Total
revenue for the nine months ended September
30, 2013 was $14.7 million
versus $21.1 million a year ago.
The Company reported a negative gross margin on
product sales of $0.3 million for the
three months ended September 30, 2013
unchanged from the comparative period. The negative gross
margin on product sales was attributable to lower product sales of
WF10 and Synera that were offset by an improved margin related to
higher Pennsaid product sales. For the nine months ended
September 30, 2013, the Company
reported a negative gross margin of $0.5
million compared to a positive gross margin of $1.3 million for the comparative periods in
2012.
Total operating expenses for the three and nine
months ended September 30, 2013 were
$4.6 million and $13.1 million compared to $5.2 million and $17.2
million for the three and nine months ended September 30, 2012. The decrease in
operating expenses was primarily due to lower sales and marketing
(S&M) costs.
Research and development (R&D) expenses were
consistent at $1.7 million for the
three months ended September 30, 2013
and 2012. In the quarter, expenses related to the advancement
of the WF10 development program were entirely offset by lower
external drug spending on the HLT Patch. R&D expenses
decreased to $5.1 million for the
nine months ended September 30, 2013
compared to $5.3 million for the nine
months ended September 30, 2012.
S&M expenses were $0.3 million and $0.6
million for the three and nine months ended September 30, 2013 compared to $1.2 million and $4.6
million for the comparative periods in 2012. In the
quarter, the Company sold the U.S. rights to Synera to Galen and
incurred termination costs of $0.2
million. The comparative period included marketing
costs related to the Company's efforts to sell Synera in the
U.S.
General and administrative (G&A) expenses
were $2.3 million for the three
months ended September 30, 2013
compared to $2.2 million for the
three months ended September 30,
2012. The small increase in G&A expenses in the quarter
related to increased amortization expense on the intangible assets
and fees related to the Mallinckrodt
litigation. Partially offsetting these increases was a
reduction in operating costs related to the closing of the
Company's office in Salt Lake
City. G&A expenses were unchanged at $7.0 million for the nine months ended
September 30, 2013 and September 30, 2012.
Net loss for the three months ended September 30, 2013 was $2.9 million compared to $2.0 million for the three months ended
September 30, 2012. In the
quarter, the increase in revenue related to the Galen Upfront
Payment and the Pliaglis Milestone Payment and the decrease in
operating expenses was entirely offset by the $6.4 million impairment charge on intangible
assets (see ZARS Impairment Charge below). In addition, the
comparative period included a $1.2
million gain related to the revaluation of the ZARS
contingent consideration. Net loss for the nine months ended
September 30, 2013 was $8.4 million compared to $2.4 million for the nine months ended
September 30, 2012.
Cash and cash equivalents were $14.6 million as at September 30, 2013 compared to $12.1 million as at December 31, 2012. The US$2.0 million milestone payment for Pliaglis is
not due from Galderma until the first quarter of 2014.
Cash provided by operating activities for the
three months ended September 30, 2013
was $3.7 million compared to cash
used in operating activities of $1.7
million for the three months ended September 30, 2012. The increase in cash provided
by operations was attributable to the receipt of the Galen Upfront
Payment. For the nine-month period, cash used in operating
activities was $0.1 million compared
to $6.1 million a year ago.
Net cash provided by financing activities
totaled $3.5 million for the three
months ended September 30, 2013
compared to net cash used in financing activities of $0.7 million for the three months ended
September 30, 2012. During the
quarter, Paladin advanced the second tranche of the loan facility
in the amount of $4.0 million on
closing of the Amended Paladin Debt arrangement. Net cash
provided by financing activities was $2.7
million for the nine months ended September 30, 2013 compared to $3.2 million in the prior period.
The number of common shares outstanding as at
September 30, 2013 was 8,745,828.
ZARS Impairment Charge
The Company reviewed the carrying values of the intangible assets
recognized from the acquisition of ZARS for potential impairment at
September 30, 2013, as commercial
efforts for both Pliaglis and Synera have not met
expectations. Indications for impairment did exist, and
management determined that each asset was impaired. The
Company recorded an impairment charge of $6.1 million for Pliaglis and $0.3 million for Synera.
Advance Notice By-Law
The Board of Directors of the Company has approved a By-Law
("By-Law Number 2") that requires advance notice to the Company
when director nominations are made by shareholders of the Company,
other than nominations made by or at the direction or request of
one or more shareholders pursuant to a proposal submitted to the
Company in accordance with the Business Corporations Act
(Ontario) (the "Act") or a
requisition of meeting submitted to the directors in accordance
with the Act. For an effective nomination to occur, a shareholder
is required to provide the Company with certain information,
enumerated in By-Law Number 2, about the nominating shareholder and
its proposed nominees in the time frame set out below.
In the case of an annual meeting of
shareholders, notice to the Company must be made not less than 30
nor more than 65 days prior to the date of the annual meeting;
provided; however, that in the event that the annual meeting is to
be held on a date that is less than 50 days after the date on which
the first public announcement of the date of the annual meeting was
made, notice may be made not later than the close of business on
the 10th day following such public announcement.
In the case of a special meeting of shareholders
(which is not also an annual meeting), notice to the Company must
be made not later than the close of business on the 15th day
following the day on which the first public announcement of the
date of the special meeting was made.
By-Law Number 2 is effective immediately.
Shareholders will be asked at the next shareholder meeting to
confirm and ratify By-Law Number 2, a copy of which has been filed
under the Company's profile at www.sedar.com.
About Nuvo Research Inc.
Nuvo (TSX:NRI) is a specialty pharmaceutical company focused on
improving patient's lives by developing and commercializing
innovative products that address unmet medical needs. The
Company has a diverse portfolio of products in the areas of topical
pain and immunology.
Nuvo's marketed products include
Pennsaid® (a topical treatment for the signs and
symptoms of osteoarthritis of the knee), Pliaglis (a topical local
anesthetic) and the heated lidocaine/tetracaine patch (HLT
Patch). Further information is available on the company's
website www.nuvoresearch.com or by contacting:
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 September 30,
2013 |
|
As at December 31,
2012 |
(Canadian dollars in
thousands) |
|
$ |
|
$ |
ASSETS |
|
|
|
|
CURRENT |
|
|
|
|
Cash and cash equivalents |
|
14,646 |
|
12,149 |
Accounts receivable |
|
3,904 |
|
3,771 |
Inventories |
|
1,053 |
|
1,156 |
Other current assets |
|
694 |
|
1,056 |
TOTAL CURRENT ASSETS |
|
20,297 |
|
18,132 |
|
|
|
|
|
Property, plant and equipment |
|
1,479 |
|
1,614 |
Intangible assets |
|
1,891 |
|
8,739 |
TOTAL ASSETS |
|
23,667 |
|
28,485 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
CURRENT |
|
|
|
|
Accounts payable and accrued
liabilities |
|
3,723 |
|
3,360 |
Current portion of deferred
revenue |
|
143 |
|
341 |
Current portion of finance lease
and other obligations |
|
1,994 |
|
1,900 |
TOTAL CURRENT
LIABILITIES |
|
5,860 |
|
5,601 |
Deferred revenue |
|
- |
|
57 |
Finance lease and other
obligations |
|
3,953 |
|
1,358 |
TOTAL LIABILITIES |
|
9,813 |
|
7,016 |
|
|
|
|
|
EQUITY |
|
|
|
|
Common shares |
|
228,772 |
|
228,705 |
Contributed surplus |
|
13,720 |
|
13,495 |
Accumulated other comprehensive
income |
|
949 |
|
420 |
Deficit |
|
(229,587) |
|
(221,151) |
TOTAL EQUITY |
|
13,854 |
|
21,469 |
TOTAL LIABILITIES AND
EQUITY |
|
23,667 |
|
28,485 |
|
|
|
|
|
|
|
|
|
|
|
|
NUVO RESEARCH
INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS |
|
|
|
|
Unaudited |
|
Three Months
Ended
September 30, |
Nine Months
Ended
September 30, |
|
|
2013 |
2012
(restated) |
2013 |
2012
(restated) |
(Canadian dollars in
thousands,
except per share and share figures) |
|
$ |
$ |
$ |
$ |
REVENUE |
|
|
|
|
|
Product sales |
|
831 |
1,012 |
3,105 |
6,781 |
Cost of goods
sold |
|
1,102 |
1,327 |
3,594 |
5,505 |
Gross
margin |
|
(271) |
(315) |
(489) |
1,276 |
|
|
|
|
|
|
Other
revenue |
|
|
|
|
|
Royalties |
|
1,472 |
1,356 |
4,337 |
7,006 |
Licensing fees |
|
6,828 |
1,099 |
6,998 |
7,167 |
Research and other
contract revenue |
|
6 |
33 |
268 |
132 |
Net
revenue |
|
8,035 |
2,173 |
11,114 |
15,581 |
OPERATING
EXPENSES |
|
|
|
|
|
Research and
development expenses |
|
1,748 |
1,653 |
5,128 |
5,310 |
Sales and marketing
expenses |
|
310 |
1,208 |
649 |
4,602 |
General and
administrative expenses |
|
2,328 |
2,233 |
6,970 |
7,039 |
Interest expense |
|
220 |
150 |
431 |
250 |
Interest income |
|
(26) |
(5) |
(50) |
(15) |
Total operating
expenses |
|
4,580 |
5,239 |
13,128 |
17,186 |
OTHER EXPENSES
(INCOME) |
|
|
|
|
|
Impairment of
intangible assets |
|
6,358 |
- |
6,358 |
- |
Litigation
settlement |
|
- |
(277) |
- |
(277) |
Loss (gain) on ZARS
contingent consideration |
|
- |
(1,150) |
- |
460 |
Foreign currency loss
(gain) |
|
16 |
319 |
(20) |
429 |
Net loss before
income taxes |
|
(2,919) |
(1,958) |
(8,352) |
(2,217) |
Income taxes |
|
27 |
48 |
84 |
174 |
NET LOSS |
|
(2,946) |
(2,006) |
(8,436) |
(2,391) |
Other comprehensive
income (loss) |
|
|
|
|
|
Unrealized gains (losses) on translation of foreign
operations |
|
(139) |
(786) |
529 |
(788) |
TOTAL COMPREHENSIVE
LOSS |
|
(3,085) |
(2,792) |
(7,907) |
(3,179) |
Net loss per common
share - |
|
|
|
|
|
Basic and diluted |
|
(0.34) |
(0.23) |
(0.97) |
(0.27) |
Average number of
common shares outstanding
(in thousands)
basic and diluted |
|
8,746 |
8,732 |
8,746 |
8,731 |
|
|
|
|
|
|
|
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS |
|
|
|
|
Unaudited |
|
Three months ended
September 30 |
Nine months ended
September 30 |
|
|
2013 |
2012
(restated) |
2013 |
2012
(restated) |
(Canadian dollars in
thousands) |
|
$ |
$ |
$ |
$ |
OPERATING
ACTIVITIES |
|
|
|
|
|
Net loss |
|
(2,946) |
(2,006) |
(8,436) |
(2,391) |
Items not involving
current cash flows: |
|
|
|
|
|
|
Impairment of intangible
assets |
|
6,358 |
- |
6,358 |
- |
|
Loss (gain) on ZARS contingent
consideration |
|
- |
(1,150) |
- |
460 |
|
Depreciation and amortization |
|
451 |
154 |
1,153 |
517 |
|
Deferred license revenue
recognized |
|
(85) |
(85) |
(256) |
(1,007) |
|
Deferred royalty revenue, net of
royalties earned |
|
- |
(218) |
- |
(316) |
|
Stock-based compensation |
|
226 |
87 |
329 |
576 |
|
Unrealized foreign exchange
loss |
|
5 |
336 |
25 |
315 |
|
Interest and accretion of
long-term other obligations |
|
15 |
(42) |
48 |
55 |
|
Other |
|
(2) |
(2) |
(13) |
14 |
|
|
4,022 |
(2,926) |
(792) |
(1,777) |
Net change in non-cash
working capital |
|
(352) |
1,227 |
711 |
(4,345) |
CASH PROVIDED
(USED) IN OPERATING ACTIVITIES |
|
3,670 |
(1,699) |
(81) |
(6,122) |
INVESTING
ACTIVITIES |
|
|
|
|
|
Acquisition of
property, plant and equipment |
|
(116) |
(23) |
(189) |
(38) |
Proceeds on disposal
of property, plant and equipment |
|
- |
8 |
- |
8 |
CASH USED IN
INVESTING ACTIVITIES |
|
(116) |
(15) |
(189) |
(30) |
FINANCING
ACTIVITIES |
|
|
|
|
|
Proceeds from other
obligations |
|
4,000 |
- |
4,000 |
4,000 |
Repayment of finance
lease and other obligations |
|
(481) |
(692) |
(1,346) |
(861) |
Issuance of common
shares |
|
- |
- |
- |
22 |
CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES |
|
3,519 |
(692) |
2,654 |
3,161 |
Effect
of exchange rate changes on cash and cash equivalents |
|
10 |
(200) |
113 |
(243) |
Net change in cash and
cash equivalents during the period |
|
7,083 |
(2,606) |
2,497 |
(3,234) |
Cash and cash
equivalents, beginning of period |
|
7,563 |
14,096 |
12,149 |
14,724 |
CASH AND CASH
EQUIVALENTS, END OF PERIOD |
|
14,646 |
11,490 |
14,646 |
11,490 |
|
|
|
|
|
|
Interest
paid |
|
158 |
152 |
347 |
152 |
Interest
received |
|
20 |
6 |
40 |
21 |
Income taxes
paid |
|
29 |
54 |
77 |
160 |
|
|
|
|
|
SOURCE Nuvo Research Inc.