Reports Q1 Revenue of $7.0 million and Net Income of $2.2 million
- Nuvo to Host Conference Call/Audio
Webcast May 11 at 8:00 a.m. ET -
MISSISSAUGA, ON, May 10, 2017 /CNW/ - 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 first quarter ended March 31, 2017. For further details on the
results, please refer to Nuvo's Management, Discussion and Analysis
(MD&A) and Condensed Consolidated Interim Financial Statements
which are available on the Company's website
(www.nuvopharmaceuticals.com).
First Quarter Financial Summary(1)
- Total revenue for the three months ended March 31, 2017 was $7.0
million compared to $7.8
million for the three months ended March 31, 2016.
- Adjusted EBITDA(2) decreased to $2.3 million for the three months ended
March 31, 2017 compared to
$3.0 million for the three months
ended March 31, 2016.
- Net income from continuing operations was $2.2 million for the three months ended
March 31, 2017 or $0.19 per share compared to $1.9 million or $0.17 per share for the three months ended
March 31, 2016.
- Cash and short-term investments increased to $18.6 million as at March
31, 2017 compared to $17.6
million as at December 31,
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- International Financial Reporting Standards (IFRS) financial
measure defined by the Company below.
|
First Quarter 2017 and Business Update
Pennsaid® 2%
- According to IMS Health, U.S. prescriptions of Pennsaid 2%
decreased slightly to 105,000 in the first quarter of 2017 compared
to 119,000 for the fourth quarter of 2016.
- In March, the Company entered into an exclusive license
agreement with Sayre Therapeutics PVT Ltd. (Sayre) to distribute,
market and sell Pennsaid 2% in India, Sri
Lanka, Bangladesh and
Nepal. Nuvo received an upfront
payment and is eligible to receive milestone payments and a
double-digit royalty on net sales. Nuvo will supply Pennsaid 2% to
Sayre on an exclusive basis from its manufacturing facility in
Varennes, Québec.
- In March, the Company completed 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 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 expects the 2016
Pennsaid 2% Trial data will be unblinded and topline results to be
available later this month.
- In February, 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.
"2017 is off to a very positive start," said John London, Nuvo's CEO. "Our financial
results were strong. We made progress on our strategy of
expanding and diversifying our revenue streams through the Russian
regulatory approval of Pennsaid 2% and the license agreement with
Sayre that will make Pennsaid 2% available in India, Sri
Lanka, Bangladesh and
Nepal. We continue to be pleased
that we are running a profitable company, generating net positive
cash flow and debt free."
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 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 product and geographic
diversification.
Pennsaid 2%
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 throughout 2017 and 2018. 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.
Pennsaid 2% Phase 3 Clinical Trial
The 2016 Pennsaid 2% Trial was conducted in Germany and enrolled approximately 133
patients who had suffered a grade I or grade II ankle sprain as
assessed by the investigator within 12 hours of injury.
Patients were randomly assigned on a double-blind basis to an
active arm or a placebo arm and applied either Pennsaid 2% or a
placebo consisting of a topical vehicle that includes all the
constituent ingredients of Pennsaid 2%, except its active
ingredient diclofenac sodium, to their injured ankle twice a day
for 8 days. The patients returned to the investigational site
for in-depth evaluation on days 3, 5 and 8 of treatment. The
primary endpoint for the 2016 Pennsaid 2% Trial is reduction in
pain on movement at day 3. The 2016 Pennsaid 2% Trial will
also measure a number of secondary endpoints including tenderness,
ankle function, ankle swelling, overall assessment of benefit and
satisfaction and use of rescue medication. The 2016 Pennsaid
2% Trial commenced in November 2016
and was fully enrolled in March 2017. Topline results for the
2016 Pennsaid 2% Trial are expected later in May 2017.
Horizon Ordering Patterns
Nuvo records revenue when it ships Pennsaid 2% commercial bottles
and product samples to Horizon for Horizon's sale into the U.S.
market. The amount earned by Nuvo is based on a defined
transfer price for each commercial bottle and product sample
shipped to Horizon pursuant to its long-term, exclusive supply
agreement with Horizon. Nuvo's transfer price for Pennsaid 2%
commercial bottles and product samples is not affected by Horizon's
net selling price for prescriptions filled in the U.S. Nuvo
also receives contract service revenue from Horizon. The
timing of Nuvo shipments to Horizon do 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's inventory levels and management strategies.
On November 27, 2017, 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 to individually
serialize all Pennsaid 2% packaging. In coordination with
Horizon, the Company has planned to complete installation of this
new equipment well before the November
27th implementation date of the DSCSA. The new
packaging equipment has arrived at the manufacturing plant in
Varennes, Québec and the process
of installing and qualifying it for commercial production has
commenced. It is expected that the new equipment with
qualified software will be available to produce individually
serialized commercial bottles in the second half of Q3.
The U.S. Food and Drug Administration (FDA) was expected to
publish regulations that grandfather existing non-serialized
inventory in the supply chain as of November
27th, but has not released these much anticipated
regulations yet. Due to the uncertainty respecting how the
rule will treat non-serialized inventory, Horizon has decided to
draw down its existing Pennsaid 2% inventory of non-serialized
product in advance of the November
27th implementation date. Horizon has therefore
advised Nuvo that it plans to defer any further commercial bottle
production until the serialization equipment is operational.
Sample production is not affected by the serialization issue.
These anticipated production changes will have a negative impact on
Nuvo's Q2 and Q3 sales and earnings relative to normal prescription
trends and purchases by Horizon; however, it is expected that sales
to Horizon will pick up in the remainder of the year, when the
serialization equipment comes on stream and Horizon resumes its
more typical ordering patterns, including rebuilding its inventory
with serialized product to replace non-serialized inventory that it
draws down.
First Quarter 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 Condensed Consolidated
Interim Financial Statements which are available on the Company's
website (www.nuvopharmaceuticals.com).
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Three months
ended
|
|
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March
31,
2017
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March 31,
2016
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Change
|
(from continuing
operations, Canadian dollars in
thousands, except gross margin)
|
|
$
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$
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$
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Product
Sales
|
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6,653
|
7,325
|
(672)
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Gross Margin % on
Product Sales
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58%
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57%
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1%
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Other
Revenue
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|
329
|
517
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(188)
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Total Operating
Expenses
|
|
4,716
|
5,378
|
(662)
|
Net Income
|
|
2,196
|
1,928
|
268
|
Adjusted
EBITDA
|
|
2,298
|
2,989
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(691)
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Total revenue, consisting of product sales, royalties and
contract and other revenue for the three months ended March 31, 2017 was $7.0
million compared to $7.8
million for the three months ended March 31, 2016. The decrease in total
revenue was primarily related to a decrease in product
sales.
Total operating expenses for the three months ended March 31, 2017 decreased to $4.7 million compared to $5.4 million for the three months ended
March 31, 2016. The decrease in
operating expenses was primarily attributable to a decrease cost of
goods sold (COGS) and general and administrative (G&A)
expenses, slightly offset by an increase in research and
development (R&D) expenses.
COGS decreased to $2.8 million for
the three months ended March 31, 2017
compared to $3.1 million for the
three months ended March 31, 2016.
The decrease in COGS is attributable to a decrease in product
sales. The decrease in product sales during the current
quarter reduced the gross margin on product sales to $3.9 million or 58% compared to $4.2 million or 57% in the comparative quarter.
R&D expenses increased slightly to $0.3 million for the three months ended
March 31, 2017 compared to
$0.2 million for the three months
ended March 31, 2016. In the
current quarter, the Company incurred R&D expenses related to
the 2016 Pennsaid 2% Trial for the treatment of acute ankle
sprains.
G&A expenses decreased to $1.7
million for the three months ended March 31, 2017 compared to $2.1 million for the three months ended
March 31, 2016. In the current
quarter, a $1.0 million decrease in
stock-based compensation (SBC) expense was partially offset by an
increase in regulatory consulting fees and an increase in general
corporate costs due to the allocation of certain corporate G&A
costs to Crescita in the comparative quarter.
The Company earned net interest income of $38,000 for the three months ended March 31, 2017 compared to $56,000 for the three months ended March 31, 2016. The decrease in net
interest income in the current quarter related to the significantly
lower cash balances as compared to the comparative period whereby
$35.0 million was transferred to
Crescita on March 1, 2016 as part of
the reorganization transaction.
The Company experienced a net foreign currency loss of
$0.1 million for the three months
ended March 31, 2017 compared to a
net foreign currency loss of $0.5
million for the three months ended March 31, 2016.
Net income from continuing operations was $2.2 million for the three months ended
March 31, 2017 compared to
$1.9 million for the three months
ended March 31, 2016. In the
current quarter, the decrease in gross margin and a slight increase
in R&D expenses were more than offset by a decrease in G&A
expenses and a decrease in foreign exchange losses.
Adjusted EBITDA decreased to $2.3
million for the three months ended March 31, 2017 compared to $3.0 million for the three months ended
March 31, 2016. In the current
quarter, an increase in net income from continuing operations was
more than offset by a decrease in SBC expenses.
Cash and short-term investments were $18.6 million as at March
31, 2017 compared to $17.6
million as at December 31,
2016. The $1.0 million increase
in cash and short-term investments was primarily attributable to an
increase in cash provided by operations.
The number of common shares outstanding as at March 31, 2017 was 11,550,897.
Non-IFRS Financial Measures
Adjusted EBITDA
EBITDA is a non-IFRS financial measure. The term EBITDA does
not have any standardized meaning under IFRS and therefore may not
be comparable to similar measures presented by other
companies. The Company defines Adjusted EBITDA as net income
from continuing operations before net interest income, plus income
tax expense, depreciation, amortization and SBC. Management
believes Adjusted EBITDA is a useful supplemental measure from
which to determine the Company's ability to generate cash available
for working capital, capital expenditures and income taxes.
The following is a summary of how EBITDA and Adjusted EBITDA are
calculated:
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Three months
ended
|
|
|
|
|
March
31,
2017
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March 31,
2016
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in
thousands
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|
|
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$
|
$
|
Net income from
continuing operations
|
|
|
|
2,196
|
1,928
|
Add back:
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|
|
|
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Net interest
income
|
|
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(38)
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(56)
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Depreciation and
amortization
|
|
|
|
54
|
58
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EBITDA
|
|
|
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2,212
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1,930
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Add back:
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SBC
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|
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|
86
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1,059
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Adjusted
EBITDA
|
|
|
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2,298
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2,989
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Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results tomorrow
(Thursday, May 11, 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 12423297. 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
May 18, 2017 by calling 1 (855)
859-2056 or (416) 849-0833, reference number 12423297.
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
This Press Release
contains "forward-looking statements" within the meaning of
applicable securities laws. Forward-looking statements can be
identified by words such as: "anticipate," "intend," "plan,"
"goal," "seek," "believe," "project," "estimate," "expect,"
"strategy," "future," "likely," "may," "should," "will" and similar
references to future periods.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
the Company's current beliefs, expectations and assumptions
regarding the future of its business, future plans and strategies,
projections, anticipated events and trends, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of the Company's control. Nuvo's actual results
and financial condition may differ materially from those indicated
in the forward-looking statements. Therefore, readers should not
rely on any of these forward-looking statements. Important factors
that could cause Nuvo's actual results and financial condition to
differ materially from those indicated in the forward-looking
statements include, among others, the risk factors included in
Nuvo's most recent 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 Nuvo with Canadian securities regulatory
agencies and commissions. These and other factors should be
considered carefully and readers should not place undue reliance on
Nuvo'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 none of Nuvo or any
other person assumes responsibility for the accuracy and
completeness of these forward-looking statements.
Any forward-looking statement made by the Company in this
Press Release is based only on information currently available to
it and speaks only as of the date on which it is made. Except as
required by applicable securities laws, Nuvo undertakes no
obligation to publicly update any forward-looking statement,
whether written or oral, that may be made from time to time,
whether as a result of new information, future developments or
otherwise.
SOURCE Nuvo Pharmaceuticals Inc.