- Nuvo to Host Conference Call/Audio
Webcast November 8th at 8:30 a.m. ET -
MISSISSAUGA, ON, Nov. 8, 2018 /PRNewswire/ - Nuvo
Pharmaceuticals Inc. (Nuvo or the Company) (TSX: NRI) (OTCQX:
NRIFF), a globally focused, 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,
2018. 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). All
figures are in Canadian dollars, unless otherwise noted.
Third Quarter 2018 Highlights and Business Update
- On July 26, 2018, the Company's
wholly owned subsidiary Nuvo Pharmaceuticals (Ireland) DAC (Nuvo Ireland) signed a license
and supply agreement with Fagron Belgium NV (Fagron) granting
Fagron the rights to commercialize Resultz® in
Belgium, the Netherlands and Luxembourg (the Territory) as a class one
medical device for the human treatment of head lice infestation.
Resultz is cleared for marketing in the Territory. Pursuant to the
license agreement, Nuvo Ireland received upfront consideration and
will receive royalties on net sales of Resultz in the Territory.
Nuvo will also earn revenue from Fagron pursuant to the exclusive
supply agreement.
- On September 19, 2018, the
Company announced the entering into of definitive, binding purchase
agreements with Aralez Pharmaceuticals Inc. (Aralez) to acquire a
portfolio of revenue-generating products, as well as the associated
personnel and infrastructure to continue the products' management
and growth (the Aralez Transaction). Upon closing, the Company
would pay Aralez US$110 million in
cash (less the US$4.4 million deposit
previously paid), with funding provided by certain funds managed by
Deerfield Management Company, L.P. (Deerfield). Aralez, along with its Canadian
subsidiary, Aralez Pharmaceuticals Canada Inc., has commenced
voluntary proceedings under Canada's Companies' Creditors Arrangement
Act (the CCAA) in the Ontario Superior Court of Justice (the
Ontario Court) and certain other
subsidiaries of Aralez have voluntarily filed petitions under
Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for
the Southern District of New York.
(the U.S. Court). The Aralez Transaction is subject to a specified
sale process in accordance with certain bidding procedures that
were approved by the Ontario Court
and the U.S Court. Such sale process allows other bidders to submit
superior offers for the assets to be acquired by Nuvo that Nuvo
will have the opportunity to match or exceed in an auction process.
If another bidder wins the auction with a superior bid, Nuvo may be
entitled to receive expense reimbursement and break-fees in the
amount of approximately US$4.6
million, plus the return of its US$4.4 million cash deposit. If Nuvo is the
successful bidder in the sale process, closing of the Aralez
Transaction will be subject to certain conditions, including
approval of the Aralez Transaction by the Ontario Court and the U.S. Court, as well as
approval by the Toronto Stock Exchange. There can be no assurance
that Nuvo will ultimately be the successful bidder or that the
Aralez Transaction will be successfully completed. The definitive
purchase agreements and binding commitment letter for the funding
to be provided by Deerfield can be
found under Nuvo's profile at www.sedar.com.
- On October 24, 2018, the
Company's licensee in Switzerland,
Gebro Pharma AG (Gebro), submitted its marketing authorization
application for Pennsaid® 2% to Swissmedic, the
overseeing Swiss regulatory authority. This submission is the first
European market where Pennsaid 2% has been submitted for
registration and marks another step in the Company's plans to
expand the commercialization of Pennsaid 2% internationally.
Third Quarter Financial Summary
- Total revenue was $5.1 million
for the three months ended September 30,
2018 compared to $3.0 million
for the three months ended September 30,
2017.
- Adjusted EBITDA(1) was $(1.6)
million for the three months ended September 30, 2018 (including $2.4 million of transaction expenses related to
the Aralez Transaction) compared to Adjusted EBITDA of $(0.1) million for the three months ended
September 30, 2017.
- Net loss was $2.4 million for the
three months ended September 30, 2018
compared to a net loss of $0.2
million for the three months ended September 30, 2017. Net loss for the three months
ended September 30, 2018 was
inclusive of non-cash amortization expense of $0.5 million related to the Resultz patents and
$2.4 million of transaction expenses
related to the Aralez Transaction.
- Cash was $4.1 million as at
September 30, 2018 compared to
$6.7 million as at June 30, 2018. Cash was affected in the quarter
by a US$4.4 million ($5.7 million) deposit paid in connection with the
Aralez transaction.
(1)
|
Adjusted EBITDA is a
non-International Financial Reporting Standards (IFRS) financial
measure defined by the Company below.
|
"We continue to focus on revenue diversification and growth,"
said Jesse Ledger, Nuvo's President
and CEO. "Our recent acquisition of Resultz will
further contribute to revenue growth and diversification, as we
expand this business into available markets such as the transaction
recently announced with Fagron. We continue to remain focused
on maximizing existing asset opportunities such as Resultz and
Pennsaid 2% while pursuing new opportunities like the Aralez
Transaction. While our short-term goal is to complete the
Aralez Transaction, we never lose sight of our first priority,
which is to increase shareholder value."
Growth Strategy
The Company's focus, in the
short-term, is to maximize the value of Pennsaid 2% and Resultz
through out-licensing to commercial partners in international
markets, identifying new opportunities to acquire additional,
revenue generating or late-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.
The Aralez Transaction
On October 10, 2018, the Ontario Court approved the bankruptcy claim
proceedings and bidding procedures for Aralez. These
approvals secured the Company's position as the "stalking horse"
bidder in the Aralez Transaction and provide definitive timelines
for completion of the sale process. If a competing bidder
submits a superior offer to the Company's "stalking horse" bid, an
auction will take place on November 29,
2018 in New York City at
which time Nuvo will have the opportunity to increase its
bid. The successful bidder will be notified on December 3, 2018 and a sale hearing to approve
the final sale would be held on December
4, 2018. If the Company succeeds in the process,
closing would be anticipated prior to the end of December
2018. If another bidder wins the auction with a superior bid,
the Company may be entitled to receive expense reimbursement and
break-fees in the amount of approximately US$4.6 million, plus the return of its
US$4.4 million cash deposit.
Table of Selected Financial Results
For further
details on the results, please refer to Nuvo's MD&A and the
Condensed Consolidated Interim Financial Statements which are
available on the Company's website
(www.nuvopharmaceuticals.com).
|
Three months
ended
|
Nine months
ended
|
|
September
30,
2018
|
September
30,
2017
|
Change
|
September
30,
2018
|
September
30,
2017
|
Change
|
(in thousands,
except gross margin)
|
$
|
$
|
$
|
$
|
$
|
$
|
Product
Sales
|
4,456
|
2,700
|
1,756
|
13,560
|
12,139
|
1,421
|
Other
Revenue
|
629
|
256
|
373
|
1,831
|
899
|
932
|
Total Operating
Expenses
|
7,186
|
3,052
|
4,134
|
16,730
|
11,015
|
5,715
|
Gross Margin % on
Product Sales
|
51%
|
40%
|
11%
|
53%
|
52%
|
1%
|
Net Income
(Loss)
|
(2,407)
|
(226)
|
(2,181)
|
(1,522)
|
1,767
|
(3,289)
|
Adjusted
EBITDA
|
(1,624)
|
(51)
|
(1,573)
|
789
|
2,133
|
(1,344)
|
Total revenue, consisting of product sales, license and contract
revenue for the three months ended September
30, 2018 was $5.1 million
compared to $3.0 million for the
three months ended September 30,
2017. The increase in total revenue was primarily related to
an increase in Pennsaid 2% product sales to the Company's U.S.
partner, Horizon Pharma plc and royalty revenue from Resultz net
sales in select international markets. Total revenue for the
nine months ended September 30, 2018
was $15.4 million compared to
$13.0 million for the comparative
nine-month period.
Total operating expenses for the three months ended September 30, 2018 were $7.2 million compared to $3.1 million for the three months ended
September 30, 2017. The
increase in operating expenses was primarily attributable to an
increase in cost of goods sold (COGS), general and administrative
(G&A) expenses, including $2.4
million of transaction costs incurred in the quarter
relating to the Aralez Transaction and amortization of intangibles.
Total operating expenses for the nine months ended
September 30, 2018 were $16.7 million, an increase from $11.0 million for the nine months ended
September 30, 2017.
COGS for the three and nine months ended September 30, 2018 was $2.2 million and $6.4
million compared to $1.6
million and $5.8 million for
the three and nine months ended September
30, 2017. Gross margin on product sales was
$2.3 million or 51% and $7.1 million or 53% for the three and nine months
ended September 30, 2018 compared to
a gross margin of $1.1 million or 40%
and $6.3 million or 52% for the three
and nine months ended September 30,
2017.
G&A expenses were $4.5 million
for the three months ended September 30,
2018 compared to $1.4 million
for the three months ended September 30,
2017. The increase in the current three-month period
includes $2.4 million for legal and
diligence transaction costs related to the Aralez Transaction,
incremental costs related to the Resultz business, increased
scientific and regulatory costs associated with the advancement of
the Company's Pennsaid 2% European regulatory strategy and an
increase in compensation costs due to increased employee
headcount resulting from the strengthening of the executive and
senior management team to facilitate the Company's growth
strategy. G&A expenses were $8.8 million for
the nine months ended September 30, 2018 compared
to $4.8 million for the nine months ended September
30, 2017.
For the three and nine months ended September 30, 2018, the Company recognized
non-cash costs of $0.5 million and
$1.5 million in amortization related
to the Resultz patents.
Net loss for the three months ended September 30, 2018 was $2.4 million compared to a net loss of
$0.2 million for the three months
ended September 30, 2017. In
the current quarter, the decrease was primarily attributable to a
$3.1 million increase in G&A
expenditures, a $0.5 million increase
in amortization, an increase in foreign currency loss of
$0.1 million and a $0.1 million increase in the fair value
remeasurement of the Company's contingent and variable
consideration, offset by an increase in gross margin of
$1.2 million and other revenue
increase of $0.4 million. Net
loss for the nine months ended September 30,
2018 was $1.5 million compared
to net income of $1.8 million for the
nine months ended September 30,
2017.
Adjusted EBITDA decreased to $(1.6)
million for the three months ended September 30, 2018 compared to $(0.1) million for the three months ended
September 30, 2017. The
decrease in Adjusted EBITDA in the current quarter was primarily
attributable to an increase in G&A expenses and amortization,
partially offset by an increase in gross margin and other
revenue. Adjusted EBITDA increased to $0.8 million for
the nine months ended September 30, 2018 compared
to $2.1 million for the comparative nine-month
period.
Cash was $4.1 million as at
September 30, 2018 compared to
$6.7 million as at June 30, 2018. The decrease was primarily
attributable to a deposit of US$4.4
million ($5.7 million)
relating to the Aralez Transaction.
The number of common shares outstanding as at September 30, 2018 was 11,362,306.
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
before net interest income, plus income tax expense (recovery),
depreciation and 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
|
|
2018
|
2017
|
2018
|
2017
|
in
thousands
|
$
|
$
|
$
|
$
|
Net income
(loss)
|
(2,407)
|
(226)
|
(1,522)
|
1,767
|
Add back:
|
|
|
|
|
Income tax expense
(recovery)
|
5
|
1
|
(123)
|
1
|
Net interest
income
|
(7)
|
(46)
|
(37)
|
(118)
|
Depreciation and
amortization
|
635
|
62
|
1,860
|
174
|
EBITDA
|
(1,774)
|
(209)
|
178
|
1,824
|
Add back:
|
|
|
|
|
Stock-based
compensation
|
150
|
158
|
611
|
309
|
Adjusted
EBITDA
|
(1,624)
|
(51)
|
789
|
2,133
|
Management to Host Conference Call/Webcast
Management
will host a conference call to discuss the results today
(Thursday, November 8, 2018) at
8:30 a.m. ET. To participate in
the conference call, please dial 1 888 390 0546 or 416 764
8688. 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 15, 2018 by calling 1 888
390 0541 or 416 764 8677 playback passcode 531159.
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 globally focused, 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, revenue
generating or 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 information in this
press release includes, but is not limited to, statements with
respect to the ability of the parties to complete the Aralez
Transaction and the financing arrangements with Deerfield (including the satisfaction of the
conditions to completion of the Aralez Transaction and the
financing arrangements with Deerfield), the timeline for the closing of
the Aralez Transaction, and the receipt of the Company of any
expense reimbursement or break fees. The forward-looking
information contained in this press release is based on certain
expectations and assumptions made by Nuvo, including the receipt of
required approvals and the satisfaction of other conditions to the
Aralez Transaction and the financing arrangements with Deerfield; and that the definitive agreements
in respect of the Aralez Transaction and the commitment letter in
respect of the financing arrangements with Deerfield will not be amended or
terminated.
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 due to a number of factors and
risks. Material factors and assumptions used to develop the
forward-looking information contained in this news release, and
material risk factors that could cause actual results to differ
materially from the forward-looking information, include but are
not limited to, the failure to satisfy the conditions relating to
the Aralez Transaction and the financing arrangements with
Deerfield (including failure to
obtain any required approvals, including the approval of the U.S.
Court and the Ontario Court); the
occurrence of any event, change or other circumstance that could
give rise to the termination of the definitive agreements in
respect of the Aralez Transaction or the commitment letter in
respect of the financing arrangements with Deerfield; material adverse changes in the
business or affairs of the acquired businesses or Nuvo; either
party's failure to consummate the Aralez Transaction or the
financing arrangements with Deerfield when required; competitive factors
in the industries in which the acquired businesses and Nuvo
operate; interest rates, prevailing economic conditions; and other
factors, many of which are beyond the control of Nuvo.
Additional 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.
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SOURCE Nuvo Pharmaceuticals Inc.