- Nuvo to Host Conference Call/Audio
Webcast March 23 at 8:30 a.m. ET -
MISSISSAUGA, ON, March 23, 2018 /CNW/ - Nuvo Pharmaceuticals Inc.
(Nuvo or the Company) (TSX:NRI ; OTCQX:NRIFF), 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, 2017. 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). All figures are in Canadian
dollars, unless otherwise noted.
Fourth Quarter 2017 and Business Update
Pennsaid® 2%
- U.S. prescriptions of Pennsaid 2% were 110,000 in the fourth
quarter of 2017 compared to 108,000 prescriptions in the third
quarter of 2017. According to IMS Health/IQVIA, for the year ended
December 31, 2017, U.S. prescriptions
of Pennsaid 2% were 434,000 compared to 457,000 for the year ended
December 31, 2016.
- In December 2017, the Company
entered into a license and distribution agreement with Gebro Pharma
AG (Gebro Pharma) for the exclusive right to register, distribute,
market and sell Pennsaid 2% in Switzerland and Liechtenstein.
Resultz®
- In January 2018, the Company's
wholly owned subsidiary, Nuvo Pharmaceuticals (Ireland) Limited (Nuvo Ireland) acquired the
U.S. product and intellectual property rights to Resultz from
Piedmont Pharmaceuticals LLC (Piedmont). The acquisition included all U.S.
product and intellectual property rights. Resultz was cleared as a
Class 1 medical device by the U.S. Food and Drug Administration
(FDA) in May 2017 and has not yet
been commercially launched in the U.S. Nuvo anticipates
commercializing Resultz in the U.S. through a licensing partner and
has already initiated discussions with potential licensees.
- In December 2017, the Company
acquired the global, ex-U.S. product and intellectual property
rights to Resultz from Piedmont.
The transaction included existing royalty streams in France, Spain, Portugal, Belgium, Ireland and the United Kingdom, Canada, Russia, Australia, and Israel which are generated from a network of
existing global licensees and license agreements that were assumed
by Nuvo.
Corporate Developments
- In November 2017, the Toronto
Stock Exchange (TSX) approved the Company's notice of intention to
make a normal course issuer bid for a portion of its outstanding
common shares as appropriate opportunities arise from time-to-time.
Pursuant to the notice, Nuvo is authorized to acquire up to a
maximum of 919,819 of its common shares, or approximately 10% of
the public float of 9,198,191 as of November
30, 2017, for cancellation over the next 12 months. Nuvo
believes that the repurchase of a portion of outstanding common
shares is an appropriate use of available cash and is in the best
interest of Nuvo and its shareholders.
- On November 28, 2017, the
Company's common shares commenced trading on the OTCQX®
market in the United States under
the symbol "NRIFF". Nuvo's common shares will continue to trade on
the TSX under the symbol "NRI".
- In November 2017, the Board of
Directors of the Company appointed Jesse
Ledger to the position of President & Chief Executive
Officer. Mr. Ledger had previously held the position of President.
Mr. Ledger assumed the CEO role from John
London who was appointed the Company's Executive Chairman
and continues to serve on its Board of Directors.
Fourth Quarter and Full Year 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) throughout 2017 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. Supply of
Pennsaid 2% physician samples was negatively affected by the
changes Horizon made to its commercial operation in 2017.
- Total revenue for the year ended December 31, 2017 was $17.5 million compared to $27.0 million for the year ended December 31, 2016. Total revenue was $4.5 million for the three months ended
December 31, 2017 compared to
$5.6 million for the three months
ended December 31, 2016.
- Adjusted EBITDA(2) decreased to $2.2 million for the year ended December 31, 2017 compared to $8.9 million in the comparative year. Adjusted
EBITDA decreased to $36,000 for the
three months ended December 31, 2017
compared to $1.3 million for the
three months ended December 31,
2016.
- Net income from continuing operations was $1.6 million for the year ended December 31, 2017 compared to $7.4 million in the comparative year. Net loss
from continuing operations was $0.2
million for the three months ended December 31, 2017 compared to net income from
continuing operations of $1.7 million
for the three months ended December 31,
2016.
- Cash and short-term investments were $10.4 million as at December 31, 2017 compared to $17.7 million as at September 30, 2017. The decrease was primarily
related to the US$7.0 million
($8.8 million) that was paid to
Piedmont to acquire the ex-U.S.
product and intellectual property rights to Resultz.
(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 remained steady in the fourth quarter
with a small increase over the third quarter 2017, but down
slightly in 2017 compared to 2016. Considering the changes
our U.S. partner Horizon made to their commercial business in 2017,
we are pleased that prescriptions of Pennsaid were not
significantly affected," said Jesse
Ledger, Nuvo's President & CEO. "During the
quarter, we shipped the first batches of serialized Pennsaid 2%
commercial bottles to Horizon, within the timelines we had expected
and well in advance of the FDAs revised deadline for implementation
of the U.S. Federal Drug Supply Chain Security Act in November 2018."
Mr. Ledger added, "We also made considerable progress in our
goal to further diversify our product portfolio and revenue streams
with the global ex-U.S. acquisition of Resultz and its related
royalty stream in December, followed by the acquisition of the U.S.
Resultz rights in January. We now have an additional best in
class product in our portfolio that offers significant
international growth potential for our business."
Growth Strategy
The Company's focus, in the short-term, is to continue to
maximize the value of Pennsaid 2% and Resultz through out-licensing
to commercial partners in international markets, 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.
Acquisition of U.S. Rights to Resultz
In January 2018, the Company's wholly
owned subsidiary, Nuvo Ireland acquired the U.S. rights to Resultz
(50% isopropyl myristate, 50% cyclomethicone D5 topical solution
lice and egg removal kit) from Piedmont. The acquisition
included all U.S. product and intellectual property rights.
Resultz was cleared as a Class 1 medical device by the FDA in
May 2017 and has not yet been
commercially launched in the U.S. Nuvo anticipates
commercializing Resultz in the U.S. through a licensing partner and
has already initiated discussions with potential licensees.
Under the terms of the agreement, US$1.5
million ($1.9 million) was
paid to Piedmont. The transaction includes a single-digit
royalty payable by Nuvo Ireland on net sales through 2034.
Nuvo, through its Nuvo Ireland subsidiary, has also obtained a
right of first refusal to license or acquire certain related assets
from Piedmont targeting other
human indications.
Acquisition of Global, ex-U.S. Rights to Resultz
In December 2017, the Company
acquired the global, ex-U.S. product and intellectual property
rights to Resultz from Piedmont. The transaction included
existing royalty streams in France, Spain, Portugal, Belgium, Ireland and the United Kingdom, Canada, Russia, Australia and Israel (collectively the Royalty Markets),
generated from a network of existing global licensees and license
agreements that were assumed by Nuvo. Current global
licensees include Reckitt Benckiser Group PLC, Aralez
Pharmaceuticals Inc., Lapidot Medical and Takeda Belgium.
Resultz is also pending registration in Japan, where the local license is held by Sato
Pharmaceutical Co. Ltd. Resultz is protected by a portfolio
of 40 issued patents globally. Resultz is currently approved
for sale under its European Conformity (CE) mark as a class 1
medical device, but not yet partnered or generating revenue in all
remaining E.U. territories. Under the terms of the agreement,
Nuvo paid US$7.0 million
($8.8 million) on close to
Piedmont. The transaction
also included a single-digit royalty payable by Nuvo on net sales
generated from non-Royalty Markets through 2023 and potential added
future consideration in the form of payments for achieving certain
aggregate annual net sales-based milestones.
Pennsaid 2% Out-licensing
In December 2017, the Company entered
into a license and distribution agreement with Gebro Pharma for the
exclusive right to register, distribute, market and sell Pennsaid
2% in Switzerland and
Liechtenstein. Nuvo will provide Gebro Pharma with its
existing Pennsaid 2% regulatory dossier and the FDA approval of
Pennsaid 2%, which Gebro Pharma will use to support its application
for regulatory approvals in Switzerland and Liechtenstein. Gebro anticipates meeting
with Swissmedic, the Swiss regulatory approval organization,
towards the end of Q2 or early Q3 2018 for scientific advice
regarding an application for Swiss regulatory approval. The
Company is eligible to receive milestone payments and royalties on
net sales of Pennsaid 2% in Switzerland and Liechtenstein and will earn product revenue
from Gebro Pharma pursuant to an exclusive supply agreement from
its manufacturing facility in Varennes, Québec.
In December 2017, the Company's
Indian partner, Sayre Therapeutics PVT LTD submitted its marketing
authorization application for Pennsaid 2% to the Drug Controller
General of India. If regulatory approval is obtained as
anticipated, the Company expects commercial launches of Pennsaid 2%
will commence in late 2018 or early 2019. The Company
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 Therapeutics on an exclusive basis from
its manufacturing facility in Varennes, Québec.
Nuvo anticipates 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 rules, 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 non-serialized commercial
bottles during the third quarter before the qualification process
was completed. The Company completed its qualification and
was fully compliant with the DSCSA rules during the fourth
quarter.
Horizon Adjustment of Sales and Marketing Resources
When Horizon released its Q1 2017 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 significant negative effect from
Horizon's sales force reduction that might impact Horizon's typical
commercial bottle ordering patterns moving forward. Horizon's
cost reallocation initiatives have resulted in a decrease in the
number of product samples Horizon distributes to physicians.
A reduction in sample product orders from Horizon had a negative
impact on the Company's 2017 financial results.
Fourth Quarter and Full Year Financial Review
Table of Selected Financial Results
For further
details on the results, please refer to Nuvo's MD&A and the
Consolidated Financial Statements which are available on the
Company's website (www.nuvopharmaceuticals.com).
|
Three months
ended
|
Year ended
|
|
December
31,
2017
|
December
31,
2016
|
Change
|
December
31,
2017
|
December
31,
2016
|
Change
|
(from continuing
operations, in thousands, except gross margin)
|
$
|
$
|
$
|
$
|
$
|
$
|
Product
Sales
|
4,199
|
5,194
|
(995)
|
16,338
|
24,824
|
(8,486)
|
Gross Margin % on
Product Sales
|
46%
|
51%
|
(5%)
|
50%
|
54%
|
(4%)
|
Other
Revenue
|
286
|
379
|
(93)
|
1,185
|
2,215
|
(1,030)
|
Total Operating
Expenses
|
4,634
|
3,959
|
675
|
15,649
|
19,307
|
(3,658)
|
Net Income
(Loss)
|
(186)
|
1,739
|
(1,925)
|
1,581
|
7,409
|
(5,828)
|
Adjusted
EBITDA
|
36
|
1,309
|
(1,273)
|
2,169
|
8,873
|
(6,704)
|
Total revenue, consisting of product sales, royalties and
contract revenue for the three months ended December 31, 2017 was $4.5
million compared to $5.6
million for the three months ended December 31, 2016. The decrease in total
revenue was primarily related to a decrease in Pennsaid 2% product
sales. Total revenue for the year ended December 31, 2017 was $17.5 million compared to $27.0 million for the comparative year.
Total operating expenses for the three months ended December 31, 2017 increased to $4.6 million compared to $4.0 million for the three months ended
December 31, 2016. The increase
in operating expenses was primarily attributable to an increase in
general and administrative (G&A) expenses, partially offset by
a decrease in cost of goods sold (COGS) and research and
development (R&D) expenses. Total operating expenses for
the year ended December 31, 2017
decreased to $15.6 million from
$19.3 million in the comparative
year.
COGS for the three months ended December
31, 2017 was $2.3 million
compared to $2.5 million for the
three months ended December 31,
2016. The decrease in COGS was primarily related to a
decrease in Pennsaid 2% product sales. The decrease in
product sales reduced the gross margin on product sales to
$1.9 million or 46% for the three
months ended December 31, 2017
compared to $2.7 million or 51% for
the three months ended December 31,
2016. For the year ended December 31,
2017, COGS was $8.1 million
compared to $11.4 million in the
comparative year. Gross margin on product sales was
$8.2 million or 50% for the year
ended December 31, 2017 compared to a
gross margin of $13.5 million or 54%
for the year ended December 31,
2016.
R&D expenses decreased to $36,000 for the three months ended December 31, 2017 compared to $0.6 million for the three months ended
December 31, 2016. The decrease
in the quarter related to costs associated with the 2016 Pennsaid
2% Trial for the treatment of acute ankle sprains which were
recognized in the comparative period. The 2016 Pennsaid 2%
Trial was completed in May of 2017 and the majority of the costs
were previously recognized. R&D expenses were $0.6 million for the year ended December 31, 2017 compared to $1.4 million for the comparative year.
G&A expenses increased to $2.4
million for the three months ended December 31, 2017 compared to $0.9 million for the three months ended
December 31, 2016. The increase
in the current quarter of $1.5
million was primarily related to a $0.6 million increase in stock-based compensation
(SBC) expense and increased employee head count which resulted from
the strengthening of the executive and senior management team aimed
to facilitate the Company's growth strategy. G&A expenses
were $7.1 million for the year ended
December 31, 2017 compared to
$6.7 million for the year ended
December 31, 2016.
Net interest income was $39,000
for the three months ended December 31,
2017 compared to $37,000 for
the three months ended December 31,
2016. For the year ended December 31,
2017 net interest income was $0.2
million and $0.1 million in
the comparative year. The Company earns interest income on
its short-term investments and its high interest savings
account.
Other expenses (income) primarily consists of net foreign
currency gains or losses. Foreign currency gains or losses are
recognized based on movements in the Canadian dollar against U.S.
dollar and euro denominated cash, receivables, payables and other
obligations
Net loss from continuing operations was $0.2 million for the three months ended
December 31, 2017 compared to net
income from continuing operations of $1.7
million for the three months ended December 31, 2016. The decrease in net
income from continuing operations was primarily related to a
decrease in gross margin and an increase in G&A expenses.
Net income from continuing operations was $1.6 million for the year ended December 31, 2017 compared to $7.4 million for the year ended December 31, 2016.
Adjusted EBITDA decreased to $36,000 for the three months ended December 31, 2017 compared to $1.3 million for the three months ended
December 31, 2016. In the
current quarter, a decrease in Adjusted EBITDA primarily related to
a decrease in gross margin. Adjusted EBITDA decreased to
$2.2 million for the year ended
December 31, 2017 compared to
$8.9 million for the comparative
year.
Cash and short-term investments were $10.4 million as at December 31, 2017 compared to $17.7 million as at September 30, 2017 and $17.6 million as at December 31, 2016. The decrease was
primarily related to the US$7.0
million ($8.8 million) that
was paid to Piedmont to acquire
the ex-U.S. product and intellectual property rights to
Resultz.
The number of common shares outstanding as at December 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:
|
Three months
ended
|
Year ended
|
|
December
31,
2017
|
December
31,
2016
|
December
31,
2017
|
December
31,
2016
|
in
thousands
|
$
|
$
|
$
|
$
|
Net income
(loss) from continuing operations
|
(186)
|
1,739
|
1,581
|
7,409
|
Add back:
|
|
|
|
|
Net interest
income
|
(39)
|
(37)
|
(157)
|
(144)
|
Income tax
expense
|
-
|
-
|
1
|
-
|
Depreciation and
amortization
|
84
|
55
|
258
|
225
|
EBITDA
|
(141)
|
1,757
|
1,683
|
7,490
|
Add back:
|
|
|
|
|
Stock-based
compensation
|
177
|
(448)
|
486
|
1,383
|
Adjusted
EBITDA
|
36
|
1,309
|
2,169
|
8,873
|
Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results today
(Friday, March 23, 2018) at
8:30 a.m. ET. To participate in
the conference call, please dial 1 (888) 231-8191 or (647)
427-7450, reference number 1462349. 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 30, 2018 by calling 1 (855)
859-2056 or (416) 849-0833, reference number 1462349.
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; OTCQX:
NRIFF) is a global commercial healthcare company with a portfolio
of commercial products and pharmaceutical manufacturing
capabilities. Nuvo has four commercial products that are
available in a number of countries: Pennsaid® 2%,
Pennsaid, Resultz® and the heated lidocaine/tetracaine
patch. Nuvo manufactures Pennsaid 2% for the U.S
market, Pennsaid for the global market and the bulk drug product
for the HLT Patch at its FDA, Health Canada and E.U. approved
manufacturing facility in Varennes, Québec. The Company's focus is
to maximize the value of Pennsaid 2% and Resultz through
out-licensing to commercial partners in international markets and
identifying new opportunities to acquire additional, accretive,
late-stage products or businesses to further diversify the
Company's existing product portfolio. 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 22, 2018 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.