- Pennsaid 2% U.S. Q3 prescriptions remain
steady -
- Cash and short-term investments of
$17.7 million with no debt -
- Nuvo to Host Conference Call/Audio Webcast
November 2 at 8:30 a.m. ET -
MISSISSAUGA, ON, Nov. 1, 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 third quarter ended September 30, 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).
Third Quarter 2017 and Business Update
- U.S. prescriptions of Pennsaid 2% were 108,000 in the third
quarter of 2017 compared to 103,000 prescriptions in the third
quarter of 2016 according to IMS Health. For the first nine
months of 2017, U.S. prescriptions of Pennsaid 2% were 324,000
compared to 338,000 for the first nine months of 2016.
- In August 2017, the Company
announced it had secured a $6.0
million operating revolving credit facility (Facility) with
Royal Bank of Canada (RBC).
The Facility is a standby Facility that can be drawn by Nuvo for
working capital requirements and general corporate purposes.
Drawings are limited to a percentage of the Company's then
outstanding accounts receivable and inventory. The Company
has not drawn any amount of the Facility.
Third Quarter Financial Summary(1)
- As previously disclosed, the Company's supply of commercial
bottles of Pennsaid 2% to its U.S. partner Horizon Pharma plc
(Horizon) was affected by the installation of new packaging
equipment to facilitate compliance with the U.S. Federal Drug
Supply Chain Security Act and Horizon's plan to draw down existing
inventory during the installation process.
- Total revenue for the three months ended September 30, 2017 was $3.0 million compared to $5.5 million for the three months ended
September 30, 2016.
- Adjusted EBITDA(2) decreased to $(0.1) million for the three months ended
September 30, 2017 compared to
$1.4 million for the three months
ended September 30, 2016.
- Net loss from continuing operations was $0.2 million for the three months ended
September 30, 2017 or $(0.02) per share compared to net income from
continuing operations of $1.3 million
or $0.11 per share for the three
months ended September 30, 2016.
- Cash and short-term investments decreased to $17.7 million as at September 30, 2017 compared to $20.0 million as at June
30, 2017. The change was largely attributable to a
$2.3 million investment in working
capital in the quarter.
(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.
|
"Pennsaid 2% prescriptions, which anchor our core U.S. business
with Horizon, remained steady in the third quarter," said
John London, Nuvo's CEO.
"During the quarter, we completed the installation of serialization
equipment to our Pennsaid 2% commercial bottle line that resulted
in reduced Pennsaid 2% commercial bottle production for both Q2 and
Q3 2017. We anticipate a return to more normal commercial
bottle production volumes for Q4 2017. Importantly, we were
able to effectively manage our costs during this period while
Horizon was drawing on its inventory, positioning Nuvo for stronger
future financial performance."
Mr. London added, "We also continue to work toward expanding and
diversifying our revenue streams and have advanced discussions
ongoing for out-licensing of Pennsaid 2% in international
jurisdictions and for strategic product acquisitions."
Growth Strategy
The Company's focus, in the short-term, is to continue to
monetize Pennsaid 2% through out-licensing to commercial partners
in international markets, while at the same time, identifying new
opportunities to acquire additional, accretive, late or
commercial-stage products or businesses to further diversify the
Company's existing product portfolio and revenue streams, and to
better utilize the Company's manufacturing facility in Varennes, Québec.
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 FDA approved site in
Varennes, Québec. Nuvo will
continue to actively seek appropriately priced bolt-on or
transformative transactions that are strategically aligned with the
Company's business plan and will deliver shareholder
value.
Pennsaid 2% Out-licensing
Despite the failure of the 2016 Pennsaid 2% Trial, Nuvo continues
to be in active discussions with potential commercial licensees of
Pennsaid 2% for various global territories. Nuvo anticipates
signing licensing agreements covering multiple countries by the end
of 2017 and throughout 2018. Nuvo projects that incremental
revenue from licensing agreements signed in 2017 will commence in
late 2018 or early 2019, subject to obtaining regulatory approvals
for Pennsaid 2% in the related territories.
Pennsaid 2% U.S. Update
Federal Drug Supply Chain Security Act Compliance
The Federal Drug Supply Chain Security Act (DSCSA) rules require
all manufacturers of drug products sold in the U.S. to serialize
each individual drug 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, the Company has
purchased new packaging equipment and technology systems in
coordination with Horizon. The Company commenced the process
of installing and qualifying the new packaging equipment at its
manufacturing plant in Varennes,
Québec for commercial production; however, on June 30, after the Company had stopped commercial
production of non-serialized commercial bottles for Horizon, the
FDA announced that it was extending the date for serialization
compliance by one year to November
27, 2018. As a result of this change, Horizon
requested that the Company deliver some non-serialized commercial
bottles during the third quarter before the qualification process
is completed. The Company expects to complete qualification
and be fully compliant with the DSCSA before the end of this
year.
Horizon Adjustment of Sales and Marketing Resources
When Horizon released its Q1 results, it indicated that due to
reimbursement pricing pressures, the profitability of its primary
care group that sells Pennsaid 2% and other drug products had
decreased. As a result, Horizon indicated that it was
reallocating resources to better align its costs and profits.
The reallocation included a reduction in the size of Horizon's
primary care sales force that markets Pennsaid 2% to
physicians. Nuvo gets paid a fixed price per commercial
bottle supplied to Horizon and is not directly impacted by any
reduction in Horizon's profitability. With prescription
volumes relatively consistent quarter-to-quarter in fiscal 2017,
the Company has not yet seen a negative effect from Horizon's sales
force reduction that might impact Horizon's typical commercial
bottle ordering patterns moving forward. The Company expects
Horizon's cost reallocation initiatives to result in a decrease in
the number of product samples Horizon distributes to
physicians. A reduction in sample product orders from Horizon
will have a negative impact on the Company's future financial
results.
Third 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).
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2017
|
September
30,
2016
|
Change
|
September
30,
2017
|
September
30,
2016
|
Change
|
(from continuing
operations, Canadian
dollars in thousands, except gross margin)
|
$
|
$
|
$
|
$
|
$
|
$
|
Product
Sales
|
2,700
|
4,988
|
(2,288)
|
12,139
|
19,630
|
(7,491)
|
Gross Margin % on
Product Sales
|
40%
|
49%
|
(9%)
|
52%
|
55%
|
(3%)
|
Other
Revenue
|
256
|
530
|
(274)
|
899
|
1,836
|
(937)
|
Total Operating
Expenses
|
3,052
|
4,362
|
(1,310)
|
11,015
|
15,348
|
(4,333)
|
Net Income
(Loss)
|
(226)
|
1,251
|
(1,477)
|
1,767
|
2,490
|
(723)
|
Adjusted
EBITDA
|
(51)
|
1,399
|
(1,450)
|
2,133
|
7,564
|
(5,431)
|
Total revenue, consisting of product sales, royalties and
contract and other revenue for the three months ended September 30, 2017 was $3.0 million compared to $5.5 million for the three months ended
September 30, 2016. The
decrease in total revenue was primarily related to a decrease in
product sales. Total revenue for the nine months ended
September 30, 2017 was $13.0 million compared to $21.5 million for the comparative nine-month
period.
Total operating expenses for the three months ended September 30, 2017 decreased to $3.1 million compared to $4.4 million for the three months ended
September 30, 2016. The
decrease in operating expenses was primarily attributable to a
decrease in cost of goods sold (COGS) and research and development
(R&D) expenses. Total operating expenses for the nine
months ended September 30, 2017
decreased to $11.0 million from
$15.3 million in the comparative
nine-month period.
COGS decreased to $1.6 million for
the three months ended September 30,
2017 compared to $2.5 million
for the three months ended September
30, 2016. The decrease in COGS was attributable to a
decrease in product sales. The decrease in product sales
during the current quarter reduced the gross margin on product
sales to $1.1 million or 40% compared
to $2.5 million or 49% in the
comparative quarter. For the nine months ended September 30, 2017, COGS was $5.8 million compared to $8.8 million in the comparative nine-month
period. Gross margin on product sales for the nine months
ended September 30, 2017 was
$6.3 million or 52% compared to
$10.8 million or 55% for the nine
months ended September 30,
2016.
R&D expenses were $38,000 for
the three months ended September 30,
2017 compared to $0.4 million
for the three months ended September
30, 2016. R&D expenses were $0.5 million for the nine months ended
September 30, 2017 compared to
$0.8 million for the comparative
nine-month period. The decrease in spending in the current
nine-month period related to the 2016 Pennsaid 2% Trial for the
treatment of acute ankle sprains. The 2016 Pennsaid 2% Trial
was completed in May of 2017 and as such the majority of the costs
were previously recognized. R&D expenses incurred in the
comparative nine-month period, primarily related to the completion
of the 2015 Pennsaid 2% Trial.
G&A expenses decreased to $1.4
million for the three months ended September 30, 2017 from $1.5 million for the three months ended
September 30, 2016. The
decrease in the current quarter was primarily attributable to
decreased professional fees incurred by the Company as the
comparative three-month period included professional fees related
to a potential merger transaction the Company did not pursue.
G&A expenses were $4.8 million
for the nine months ended September 30,
2017 compared to $5.8 million
for the nine months ended September 30,
2016.
Net interest income was $46,000
and $0.1 million for the three and
nine months ended September 30, 2017
compared to $29,000 and $0.1 million for the three and nine months ended
September 30, 2016. The Company
earns interest income on its short-term investments and its high
interest savings account.
For the three months ended September 30,
2017, the Company experienced a net foreign currency loss of
$0.1 million compared to a net
foreign currency gain of $0.1 million
in the comparative quarter. For the nine months ended
September 30, 2017, the Company
experienced a net foreign currency loss of $0.3 million compared to a net foreign currency
loss of $0.5 million in the
comparative nine-month period.
Net loss from continuing operations was $0.2 million for the three months ended
September 30, 2017 compared to net
income from continuing operations of $1.3
million for the three months ended September 30, 2016. The decrease in the
current quarter was primarily attributable to a $1.4 million reduction in gross margin on product
sales, a $0.3 million decrease in
royalties, contract and other revenue, partially offset by a
$0.4 million decrease in R&D
expenses. Net income from continuing operations was
$1.8 million for the nine months
ended September 30, 2017 compared to
$5.7 million for the nine months
ended September 30, 2016.
Adjusted EBITDA decreased to $(0.1)
million for the three months ended September 30, 2017 compared to $1.4 million for the three months ended
September 30, 2016. In the
current quarter, a decrease in Adjusted EBITDA primarily related to
a decrease in gross margin. Adjusted EBITDA decreased to
$2.1 million for the nine months
ended September 30, 2017 compared to
$7.6 million for the comparative
nine-month period.
Cash and short-term investments were $17.7 million as at September 30, 2017 compared to $17.6 million as at December 31, 2016 and $20.0 million at the end of the second quarter of
2017. The change included a $2.3
million investment in working capital in the quarter.
The number of common shares outstanding as at September 30, 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:
|
Three Months
ended
September
30
|
Nine Months
ended
September
30
|
|
2017
|
2016
|
2017
|
2016
|
in
thousands
|
$
|
$
|
$
|
$
|
Net income
(loss) from continuing operations
|
(226)
|
1,251
|
1,767
|
5,670
|
Add back:
|
|
|
|
|
Net interest
income
|
(46)
|
(29)
|
(118)
|
(107)
|
Income tax
expense
|
1
|
-
|
1
|
-
|
Depreciation and
amortization
|
62
|
57
|
174
|
170
|
EBITDA
|
(209)
|
1,279
|
1,824
|
5,733
|
Add back:
|
|
|
|
|
Stock-based
compensation
|
158
|
120
|
309
|
1,831
|
Adjusted
EBITDA
|
(51)
|
1,399
|
2,133
|
7,564
|
Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results tomorrow
(Thursday, November 2, 2017) at
8:30 a.m. ET. To participate in
the conference call, please dial 1 (888) 231-8191 or (647)
427-7450, reference number 93716145. 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
November 9, 2017 by calling 1 (855)
859-2056 or (416) 849-0833, reference number 93716145.
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.