Nuvo Research announces 2010 first quarter financial results
MISSISSAUGA, ON, April 29 /PRNewswire-FirstCall/ - Nuvo Research Inc. (TSX: NRI), a drug development company focused on the research and development of drug products that are delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the first quarter ended March 31, 2010.
Key Corporate Developments:
- Made our first shipments of Pennsaid into the U.S. to stock the
distribution network in advance of the Pennsaid U.S. launch;
- Subsequent to quarter end, announced that Mallinckrodt Inc., a
subsidiary of Covidien, commenced selling Pennsaid in the United
States. Nuvo will receive royalties on net U.S. sales of Pennsaid at
rates that are consistent with industry standards. Nuvo will also be
eligible to receive sales milestone payments totaling up to US$100
million if certain U.S. sales levels are achieved;
- Commenced enrolment of patients in its European Phase 2 clinical
trial evaluating WF10 as a treatment for allergic rhinitis; and
- Announced that all outstanding convertible debentures were converted
into common shares pursuant to Nuvo's notice of redemption to holders
of its 5% convertible debentures; the initiative removed
substantially all debt from Nuvo's balance sheet and eliminated the
obligation to make future interest payments.
"We are extremely optimistic about the Company's opportunity to leverage revenues derived from Pennsaid's U.S. sales to support our continued growth as a leader in the development of new pain medications." said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research.
Financial Results:
(thousands of Canadian dollars)
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THREE MONTHS ENDED
MARCH 31,
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2010 2009
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Revenue $ 4,051 $ 3,047
Net loss $(3,010) $(2,868)
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Operating Results
Revenue consisting of product sales, license fee revenue and research and other contract revenue for the three months ended March 31, 2010 was $4.1 million compared to $3.0 million for the three months ended March 31, 2009. The increase was primarily attributable to an increase in Pennsaid product sales as the Company filled Covidien's initial orders for commercial product and marketing samples ahead of the U.S. launch of the product this month, offset partially by the significant weakening of the euro and British pound against the Canadian dollar versus a year ago.
For the three months ended March 31, 2010 the gross margin on product sales decreased to $1.1 million compared to $1.2 million for the three months ended March 31, 2009. The gross margin was the second largest achieved by Nuvo with the largest being the $1.2 million in the comparative period. In the comparative period, the gross margin was unusually high as the Canadian manufacturing facility operated near full capacity as it built an inventory of finished product ahead of the Company's planned eight week shutdown in the second quarter of 2009 to expand capacity in anticipation of a U.S. launch. The decrease in the current period is attributable to the negative impact of the significant weakening of the euro and British pound against the Canadian dollar and the sale of marketing samples to Covidien for the upcoming U.S. launch of the product in the second quarter. The marketing samples have a lower contribution margin than the Company's other formats.
Total operating expenses, excluding foreign currency gains, for the three months ended March 31, 2010 were $5.1 million versus $4.8 million for the three months ended March 31, 2009. The increase in the quarter relates primarily to higher selling, general and administrative expenses (SG&A) offset by declines in research and development expenses, stock-based compensation, net interest expense and amortization.
Research and development expenses were $2.8 million for the three months ended March 31, 2010; a slight decrease compared to $2.9 million for the three months ended March 31, 2009. The decrease was possible as Covidien assumed responsibility for all Pennsaid and Pennsaid Plus development activities and costs subsequent to signing the licensing agreement in June 2009. Spending for the quarter was directed towards initiating and commencing enrolment in the WF10 Phase 2 clinical trial in Europe to evaluate WF10 as a treatment for allergic rhinitis, costs associated with advancing the Company's early stage pipeline candidates and the operating costs of the recently established Pain Group.
SG&A expenses increased to $2.1 million for the three months ended March 31, 2010, compared to $1.4 million for the three months ended March 31, 2009. The increase in SG&A expense is primarily attributable to consulting, professional fees and other fees relating to the Company's business development activities aimed at expanding its drug development pipeline.
Net interest expense was $34,000 for the three months ended March 31, 2010 compared to $212,000 for the three months ended March 31, 2009. The decrease in the period is attributable to lower non-cash accretion charges and cash interest payments on the convertible debentures due to the conversion of all outstanding debentures into common shares during 2009 and the first quarter of 2010.
Net loss was $3.0 million for the three months ended March 31, 2010 was only marginally larger than the $2.9 million loss for the three months ended March 31, 2009. Basic loss per share was $0.01 in both periods while the average basic number of shares outstanding increased to 400.7 million primarily as a result of the conversion of the debentures during the quarter and shares issued over the past year on the exercise of warrants.
Cash and cash equivalents were $36.3 million as at March 31, 2010 compared to $42.1 million as at December 31, 2009, primarily as a result of the $3.0 million loss and an investment in non-cash working capital to support the US launch.
Net cash used in investing activities totaled $234,000 compared to $55,000 in the three months ended March 31, 2009. The spending in 2010 was primarily for the purchase of additional production and laboratory equipment.
In the current quarter, net cash used in financing activities of $19,000 and related solely to payments on capital leases. In the prior year cash provided by financing activities totaled $2.1 million and was primarily attributable to the exercise of warrants under the early warrant exercise program.
A live audio webcast of the Nuvo Annual and Special Meeting of Shareholders will take place on April 29, 2010 at 9:00 a.m. ET. The webcast is available at www.nuvoresearch.com. The webcast will be archived for 6 months on the Nuvo website.
About Nuvo Research Inc.
Nuvo is primarily focused on the research and development of drug products delivered into and through the skin using its topical and transdermal drug delivery technologies, and on the development of its immune modulating drug candidate WF10. Nuvo's lead product is Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), which is sold in Canada, several European countries and now the United States. Pennsaid was approved for marketing in the U.S. by the FDA on November 4, 2009. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of topical and transdermal products targeting a variety of indications. Nuvo is a publicly traded, Canadian pharmaceutical company headquartered in Mississauga, Ontario. Nuvo's Pain Group is located in West Chester, Pennsylvania. Its manufacturing facilities are located in Varennes, Québec and Wanzleben, Germany, and its research and development centers are located in San Diego, California and Leipzig, Germany. For more information, please visit www.nuvoresearch.com
Forward-Looking Statements
This document contains forward-looking statements. Some forward-looking statements may be identified by words like "expects", "anticipates", "plans", "intends", "indicates" or similar expressions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Nuvo considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but caution that these assumptions regarding future events, many of which are beyond the control of the Company, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual report, as well as in Nuvo's Annual Information Form for the year ended December 31, 2009. Nuvo disclaims any intention or obligation to update or revise any forward-looking statements whether a result of new information or future events, except as required by law. For additional information on risks and uncertainties relating to these forward looking statements, investors should consult the Company's ongoing quarterly filings, annual report and Annual Information Form and other filings found on SEDAR at www.sedar.com
NUVO RESEARCH INC.
CONSOLIDATED BALANCE SHEETS
As at As at
March 31, December 31,
2010 2009
Unaudited Audited
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(Canadian dollars in thousands) $ $
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ASSETS
CURRENT
Cash and cash equivalents 36,254 42,102
Accounts receivable 3,003 2,091
Inventories 2,088 2,078
Other current assets 989 445
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TOTAL CURRENT ASSETS 42,334 46,716
Property, plant and equipment 1,958 1,834
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TOTAL ASSETS 44,292 48,550
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 3,833 4,589
Deferred revenue 1,799 2,241
Current portion of capital lease obligations 77 79
Current portion of debentures - 3,038
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TOTAL CURRENT LIABILITIES 5,709 9,947
Deferred revenue 995 1,080
Capital lease obligations 55 65
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TOTAL LIABILITIES 6,759 11,092
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SHAREHOLDERS' EQUITY
Common shares 216,702 210,086
Contributed surplus 12,552 12,536
Accumulated other comprehensive income 114 114
Deficit (191,835) (185,278)
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TOTAL SHAREHOLDERS' EQUITY 37,533 37,458
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 44,292 48,550
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NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Three months ended
March 31, March 31,
Unaudited 2010 2009
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(Canadian dollars in thousands,
except per share and share figures) $ $
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REVENUE
Product sales 3,267 2,383
Cost of goods sold 2,192 1,134
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Gross margin on product sales 1,075 1,249
Other revenue
Licensing fees 560 560
Research and other contract revenue 224 104
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1,859 1,913
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EXPENSES
Research and development 2,810 2,934
Selling, general and administrative expenses 2,089 1,363
Stock-based compensation 16 132
Amortization of property, plant, and equipment 118 149
Foreign currency gain (198) (9)
Interest expense 60 246
Interest income (26) (34)
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4,869 4,781
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NET LOSS AND TOTAL COMPREHENSIVE LOSS (3,010) (2,868)
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Net loss per common share - basic and diluted (0.01) (0.01)
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Average number of common shares outstanding
- basic and diluted (millions) 400.7 319.6
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NUVO RESEARCH INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31, March 31,
Unaudited 2010 2009
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(Canadian dollars in thousands) $ $
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OPERATING ACTIVITIES
Net loss (3,010) (2,868)
Items not involving current cash flows:
Amortization 118 149
Deferred revenue recognized (560) (560)
Stock-based compensation 16 132
Deferred stock unit expense 9 94
Accretion of interest on debentures 31 148
Unrealized foreign exchange loss 525 9
Other (1) 16
Net change in non-cash working capital (2,350) (309)
Deferred proceeds from licensing arrangements 33 23
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CASH USED IN OPERATING ACTIVITIES (5,189) (3,166)
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INVESTING ACTIVITIES
Acquisition of property, plant and equipment (234) (55)
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CASH USED IN INVESTING ACTIVITIES (234) (55)
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FINANCING ACTIVITIES
Issuance of common shares, net of related costs - 2,196
Repayments of capital lease obligations
and long-term debt (19) (62)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (19) 2,134
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Effect of exchange rate changes on cash
and cash equivalents (406) 44
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Net change in cash and cash equivalents during
the period (5,848) (1,043)
Cash and cash equivalents, beginning of period 42,102 15,219
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CASH AND CASH EQUIVALENTS, END OF PERIOD 36,254 14,176
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Interest paid 53 95
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SOURCE Nuvo Research Inc.
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