- Reports 32% Year-Over-Year Revenue
Growth -
- Nuvo to Host Conference Call/Audio
Webcast March 2 at 8:00 a.m. ET -
MISSISSAUGA, ON, March 1, 2017 /PRNewswire/ - Nuvo Pharmaceuticals
Inc. (Nuvo or the Company) (TSX:NRI), a commercial healthcare
company with a portfolio of commercial products and pharmaceutical
manufacturing capabilities, today announced its financial and
operational results for the fourth quarter and year ended
December 31, 2016. For further
details on the results, please refer to Nuvo's Management,
Discussion and Analysis (MD&A) and Consolidated Financial
Statements which are available on the Company's website
(www.nuvopharmaceuticals.com).
Fourth Quarter and Business Update (1)
Pennsaid® 2%
- According to IMS Health, for the year ended December 31, 2016, U.S. prescriptions of Pennsaid
2% were 457,000 compared to 320,000 for the year ended December 31, 2015. U.S. prescriptions of
Pennsaid 2% were 119,000 in the fourth quarter of 2016 compared to
103,000 prescriptions in the third quarter of 2016.
- In November 2016, the Company
commenced a new placebo-controlled, multi-centre Phase 3 trial
(2016 Pennsaid 2% Trial) in Germany to study Pennsaid 2% for the treatment
of acute ankle sprains. The 2016 Pennsaid 2% Trial is
designed to support regulatory applications for marketing approval
of Pennsaid 2% for the treatment of acute pain in the E.U.,
Canada and Australia. As of
February 27, 2017, 85% of the target
number of patients had been enrolled in the study. Top-line
results of the trial are expected to be available in Q2 2017.
- In February 2017, the Company
received notification from NovaMedica LLC (NovaMedica), its Russian
licensee for Pennsaid 2%, that the marketing authorization for
Pennsaid 2% had been granted by the Russian Ministry of
Health. The marketing authorization is inclusive of the
non-prescription, human use of Pennsaid 2% in treating back pain,
joint pain, muscle pain, and inflammation and swelling in soft
tissue and joints associated with trauma and rheumatic conditions.
The Company and NovaMedica are in discussions respecting
NovaMedica's commercial strategy and launch plans.
- In February 2017, Horizon advised
the Company that it plans to draw down some of its existing
inventory of commercial bottles of Pennsaid 2% and shift commercial
bottle production from Q2 to later in 2017. Horizon has asked
that the Company pull forward into Q2 some product sample orders
planned for later in the year. These inventory adjustments are in
response to the U.S. Federal Drug Supply Chain Act taking effect
November 27, 2017 that requires all
pharmaceutical drugs manufactured for the U.S. market to have
individually serialized tracking and will have a negative impact on
the Company's Q2 sales and earnings. The Company expects that sales
to Horizon will increase in the second half of the year once Nuvo's
serialization equipment comes online and Horizon resumes its more
typical ordering patterns. For additional information see
Horizon Ordering Patterns below.
Management Appointment
- In November 2016, the board of
directors of the Company appointed Jesse
Ledger to the position of President. Mr. Ledger had
previously held the position of Vice President, Business
Development. John London, who
had been Nuvo's President and Chief Executive Officer, continues to
lead the Company as its CEO.
2016 and Q4 Financial Summary(1)
- Total revenue for the year ended December 31, 2016 was $27.0 million compared to $20.5 million for the year ended December 31, 2015. Total revenue was
$5.6 million for the three months
ended December 31, 2016 compared to
$7.7 million for the three months
ended December 31, 2015.
- Adjusted EBITDA(2) increased to $8.9 million for the year ended December 31, 2016 compared to $8.0 million in the comparative year.
Adjusted EBITDA decreased to $1.3
million for the three months ended December 31, 2016 compared to $4.0 million for the three months ended
December 31, 2015.
- Net income from continuing operations was $7.4 million for the year ended December 31, 2016 compared to $8.3 million in the comparative year. Net
income from continuing operations was $1.7
million for the three months ended December 31, 2016 compared to $4.7 million for the three months ended
December 31, 2015.
- Cash and short-term investments were $17.6 million at December
31, 2016 compared to $17.4
million at September 30,
2016.
(1)
|
The financial
information presented herein reflects results from continuing
operations with Nuvo's previously disclosed segment, Crescita,
presented as a discontinued operation.
|
(2)
|
Adjusted EBITDA is a
non-IFRS financial measure defined by the Company below.
|
"2016 was a very positive and pivotal year for Nuvo," said
John London, Nuvo's CEO.
"Effective March 1, 2016, we spun out
our R&D assets and related expenses to Crescita Therapeutics
(TSX:CTX) making Nuvo a pure-play profitable specialty
pharmaceutical company with approved products, growing revenue, and
a strong balance sheet with over $17M
of cash and no debt. We are thrilled that Horizon increased
year-over-year U.S. prescriptions of Pennsaid 2% by 43% in
2016. Our plan for 2017 is to expand our revenue streams
through Pennsaid 2% international out-licensing transactions, and
product acquisitions; thereby, making Nuvo a stronger and more
diversified company."
Pennsaid 2%
Pennsaid 2% Phase 3 Trial
The Company's 2016 Pennsaid 2% Trial is being conducted
in Germany and commenced in November of 2016. The trial
is being conducted to support regulatory applications for marketing
approval of Pennsaid 2% for the treatment of acute pain in the
E.U., Canada and Australia. The Company
believes that most other jurisdictions will base their marketing
approval on the current U.S. Food and Drug Administration (FDA)
approval of Pennsaid 2% for the treatment of the pain of
osteoarthritis (OA) of the knee and will not require additional
clinical efficacy data. As of February
27, 2017, 85% of the target number of patients had been
enrolled in the study. The Company expects the trial to be
completed and top-line results available in Q2 2017.
Out-licensing Update
Nuvo is in a number of active discussions with potential commercial
licensees of Pennsaid 2% for various global territories. Nuvo
anticipates signing licensing agreements covering multiple
countries beginning in 2017. Nuvo projects that incremental
revenue from licensing agreements signed in 2017 will commence in
2018 and 2019, subject to obtaining regulatory approvals for
Pennsaid 2% in the related territories.
Licensing and Product Acquisitions
Nuvo is in active discussions relating to potential transactions to
license or acquire additional, accretive commercial assets to
further diversify the Company's product portfolio (including
Pennsaid, Pennsaid 2% and the heated lidocaine/tetracaine patch and
maximize the Company's manufacturing capabilities at our GMP
approved site in Varennes,
Québec. Nuvo is charting a course to build a business with
greater product and geographic diversification.
Horizon Ordering Patterns
Nuvo records revenue to Horizon when it ships Pennsaid 2%
commercial bottles and product samples to Horizon for the U.S.
market. The Company earns product revenue from Horizon
pursuant to a long-term, exclusive supply agreement as well as
contract service revenue. The timing of Nuvo shipments to
Horizon does not necessarily align with when U.S. patients fill
prescriptions written by their physicians.
Horizon's orders from Nuvo are influenced by demand in the U.S.
market, Horizon inventory levels and their management
strategies. On November 27,
2017, the Federal Drug Supply Chain Security Act (DSCSA)
rules come into force that require all manufacturers of drug
products sold in the U.S. to "serialize" each individual package to
enhance drug traceability in the event of an adverse event and to
prevent drug counterfeiting. In order to be in compliance
with the DSCSA, also known as the Serialization Track and
Trace Bill, the Company has
purchased new packaging equipment and technology systems that will
give it the ability to individually serialize all Pennsaid 2%
packaging. In coordination with Horizon, the Company has
planned to install this new equipment well before the November 27, 2017 implementation date of the FDA
rule change. The FDA was expected to publish regulations that
grandfather existing non-serialized inventory in the supply chain,
but has not released these much anticipated regulations yet.
Due to this uncertainty, Horizon has decided to draw down some of
its existing Pennsaid 2% inventory of non-serialized product in
advance of the November 27, 2017
implementation date. Horizon has therefore advised the
Company's Varennes manufacturing
plant to shift commercial bottle production planned for Q2 to later
in the year. Sample production is not affected by the
serialization issue and Horizon has asked that the Company pull
forward into Q2 some sample orders planned for later in the
year. These production changes will have a negative impact on
Q2 sales and earnings; however, the Company expects that sales to
Horizon will increase in the second half of the year, as the
serialization equipment comes on stream and Horizon resumes its
more typical ordering patterns.
Q4 Financial Review
Table of Selected Financial Results
For further
details on the results, please refer to Nuvo's Management,
Discussion and Analysis (MD&A) and Consolidated Financial
Statements which are available on the Company's website
(www.nuvopharmaceuticals.com).
|
Three months
ended
|
Year ended
|
|
December
31, 2016
|
December
31,
2015
|
Change
|
December
31,
2016
|
December
31,
2015
|
Change
|
(from continuing
operations, Canadian
dollars in millions, except gross margin)
|
$
|
$
|
$
|
$
|
$
|
$
|
Product
Sales
|
5.2
|
7.1
|
(1.9)
|
24.8
|
18.6
|
6.2
|
Gross Margin % on
Product Sales
|
51%
|
57%
|
(6%)
|
54%
|
47%
|
7%
|
Other
Revenue
|
0.4
|
0.6
|
(0.2)
|
2.2
|
1.9
|
0.3
|
Total Operating
Expenses
|
4.0
|
3.3
|
0.7
|
19.3
|
13.2
|
6.1
|
Net Income
(loss)
|
1.7
|
4.7
|
(3.0)
|
7.4
|
8.3
|
(0.9)
|
Adjusted
EBITDA
|
1.3
|
4.0
|
(2.7)
|
8.9
|
8.0
|
0.9
|
Total revenue, consisting of product sales, royalties and
contract revenue for the three months ended December 31, 2016 was $5.6
million compared to $7.7
million for the three months ended December 31, 2015. The decrease in revenue
was primarily related to a $0.9
million decrease in Pennsaid 2% product sales, a
$0.8 million decrease in Pennsaid
product sales to the Company's partner in Greece, a $0.2
million decrease in Pennsaid product sales to the Company's
partner in Italy due to the timing
of shipments and a $0.2 million
decrease in contract revenue. Total revenue for the year
ended December 31, 2016 was
$27.0 million compared to
$20.5 million in the comparative
year.
Total operating expenses for the three months ended December 31, 2016 increased to $4.0 million compared to $3.3 million for the three months ended
December 31, 2015. The increase
in operating expenses was primarily attributable to an increase in
general and administrative (G&A) and research and development
(R&D) expenses, partially offset by a decrease in cost of goods
sold (COGS). Total operating expenses for the year ended
December 31, 2016 were $19.3 million, an increase from $13.2 million in the comparative year.
COGS decreased to $2.5 million for
the three months ended December 31,
2016 compared to $3.0 million
for the three months ended December 31,
2015. The decrease in COGS was primarily related to a
decrease in Pennsaid 2% and Pennsaid product sales. The
decrease in product sales during the current three-month period
reduced the gross margin on product sales to $2.7 million or 51% compared to $4.0 million or 57% in the comparative
three-month period. COGS increased to $11.4 million for the year ended December 31, 2016 compared to $9.8 million in the comparative year. The
increase in COGS was due to increased product sales
year-over-year. Gross margin on product sales was
$13.5 million or 54% for the year
ended December 31, 2016 compared to a
gross margin of $8.8 million or 47%
in the comparative year.
R&D expenses increased to $0.6
million for the three months ended December 31, 2016 compared to $0.3 million for the three months ended
December 31, 2015. The increase
in R&D expenses related to costs associated with the 2016
Pennsaid 2% clinical trial for the treatment of acute ankle
sprains. R&D expenses were $1.4
million for the year ended December
31, 2016 compared to $1.3
million in the comparative year.
G&A expenses increased to $0.9
million for the three months ended December 31, 2016 compared to $0.1 million for the three months ended
December 31, 2015. The increase
in G&A expenses was primarily related to a $0.2 million increase in stock-based compensation
(SBC) expense, an increase of $0.1
million for transition services provided by Crescita and an
increase in corporate costs primarily related to the allocation of
certain corporate G&A costs to Crescita in the comparative
period. G&A expenses were $6.7
million for the year ended December
31, 2016 compared to $2.6
million in the comparative year.
The Company earned net interest income of $37,000 for the three months ended December 31, 2016 compared to $0.1 million for the three months ended
December 31, 2015. For the year
ended December 31, 2016, the Company
earned net interest income of $0.1
million compared to $0.5
million in the comparative year. The decrease in net
interest income in both the current three-month and twelve-month
periods related to the significantly lower cash balances due to the
$35.0 million transfer of funds to
Crescita as part of the Reorganization.
The Company experienced a net foreign currency gain of
$0.1 million for the three months
ended December 31, 2016 compared to a
net foreign currency gain of $0.3
million for the three months ended December 31, 2015. For the year ended
December 31, 2016, the Company
experienced a net foreign currency loss of $0.3 million compared to a net foreign currency
gain of $1.0 million in the
comparative year.
Net income from continuing operations was $1.7 million for the three months ended
December 31, 2016 compared to
$4.7 million for the three months
ended December 31, 2015. The
decrease in net income from continuing operations was primarily
related to a decrease in gross margin coupled with an increase in
G&A expenses and R&D expenses. Net income from
continuing operations was $7.4
million for the year ended December
31, 2016 compared to $8.3
million in the comparative year.
Adjusted EBITDA decreased to $1.3
million for the three months ended December 31, 2016 compared to $4.0 million for the three months ended
December 31, 2015. The decrease
in Adjusted EBITDA for the current three-month period was primarily
related to a decrease in gross margin coupled with an increase in
G&A expenses, R&D expenses, and lower net interest income
and foreign exchange gains. Adjusted EBITDA increased to
$8.9 million for the year ended
December 31, 2016 compared to
$8.0 million in the comparative
year.
Cash and short-term investments were $17.6 million as at December 31, 2016 compared to $17.4 million at September
30, 2016 and $48.7 million at
December 31, 2015. The decrease
in cash from December 31, 2015
related to the $35.0 million that was
transferred to Crescita as part of the reorganization.
The number of common shares outstanding as at December 31, 2016 was 11,546,397.
Non-IFRS Financial Measures
Adjusted EBITDA
EBITDA is a non-IFRS financial measure. The term EBITDA does
not have any standardized meaning under IFRS and therefore may not
be comparable to similar measures presented by other
companies. The Company defines Adjusted EBITDA as net income
from continuing operations before net interest income, plus taxes,
depreciation, amortization and SBC. Management believes
Adjusted EBITDA is a useful supplemental measure from which to
determine the Company's ability to generate cash available for
working capital, capital expenditures and income taxes.
The following is a summary of how EBITDA and Adjusted EBITDA are
calculated:
|
Three months
ended
|
Year ended
|
|
December
31,
2016
|
December
31,
2015
|
December
31,
2016
|
December
31,
2015
|
in
thousands
|
$
|
$
|
$
|
$
|
Net income from
continuing operations
|
1,739
|
4,701
|
7,409
|
8,328
|
Add back:
|
|
|
|
|
|
Net interest
income
|
(37)
|
(111)
|
(144)
|
(515)
|
|
Income tax
expense
|
-
|
-
|
-
|
7
|
|
Depreciation and
amortization
|
55
|
63
|
225
|
276
|
EBITDA
|
1,757
|
4,653
|
7,490
|
8,096
|
Add back:
|
|
|
|
|
|
SBC
|
(448)
|
(684)
|
1,383
|
(141)
|
Adjusted
EBITDA
|
1,309
|
3,969
|
8,873
|
7,955
|
Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results tomorrow
(Thursday, March 2, 2017) at
8:00 a.m. ET. To participate in
the conference call, please dial 1 (888) 231-8191 or (647)
427-7450, reference number 59418904. 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
March 9, 2017 by calling 1 (855)
859-2056 or (416) 849-0833, reference number 59418904.
A live audio webcast of the conference call will be available
through www.nuvopharmaceuticals.com. Please connect at least
15 minutes prior to the conference call to ensure adequate time for
any software download that may be required to hear the webcast.
About Nuvo Pharmaceuticals Inc.
Nuvo (TSX:NRI) is a
commercial healthcare company with a portfolio of commercial
products and pharmaceutical manufacturing capabilities. Nuvo
has three commercial products that are available in a number of
countries; Pennsaid 2%, Pennsaid and the heated
lidocaine/tetracaine patch. Pennsaid 2% is sold in the
U.S. by Horizon Pharma plc (NASDAQ:HZNP) and is available for
partnering in certain other territories around the world.
Nuvo manufactures Pennsaid for the global market and Pennsaid 2%
for the U.S. market at its FDA, Health Canada and E.U. approved
manufacturing facility in Varennes, Québec. For additional
information, please visit www.nuvopharmaceuticals.com.
Forward-Looking Statements
Certain statements in
this press release constitute forward-looking information and/or
forward-looking statements (collectively, "forward-looking
statements") within the meaning of applicable securities laws.
Forward-looking statements include, but are not limited to, the
future approval, marketing and sale of Pennsaid 2% in certain
jurisdictions, 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 "may", "will", "expect",
"intend", "believe", "should" or "plans", 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, but
are not limited to, general business and economic uncertainties and
adverse market conditions; as well as other risk factors included
in the Company's Management Information Circular dated December 31, 2015 and the Company's Annual
Information Form dated March 1, 2017
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. 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. Although the forward-looking
information contained in this press 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. All forward-looking statements in this
press release are qualified by these cautionary statements. The
forward-looking statements contained herein are made as of the date
of this press 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.
SOURCE Nuvo Pharmaceuticals Inc.