Nuvo Research Announces 2011 Second Quarter Results
August 10, 2011
MISSISSAUGA, ON, Aug. 10, 2011 /CNW/ - Nuvo Research Inc. (TSX: NRI), a specialty pharmaceutical company dedicated to building a portfolio of products for the topical treatment of pain and the development of its immune modulating drug candidate WF10, today announced its financial and operational results for the second quarter ended June 30, 2011.
Second Quarter and Recent Corporate Developments:
Completed the acquisition of ZARS Pharma, Inc. (ZARS), creating a leader
in the topical pain therapeutics space with the addition of Pliaglis® and Synera®;
Pennsaid U.S. prescriptions increased approximately 17%
quarter-over-quarter, to a record 40,000;
Announced positive top-line results from a Phase 2 study conducted by
Covidien for twice-daily administration of Pennsaid® Viscous Solution
for the reduction on osteoarthritis (OA) pain;
Received E.U. validation for its Marketing Authorization Application
(MAA) for Pliaglis® for local dermal anaesthesia, keeping the product
on track for launch in a number of European Union countries in 2012;
Received U.S. Food and Drug Administration (FDA) clearance for an
Investigational New Drug (IND) application for NRI-ANA, a novel
topical lidocaine spray formulation, and;
- Strengthened its commercial management team in the Pain Group with the appointment of Eric Vandal as Vice President of Sales and Marketing and Arnold Gammaitoni, Pharm.D as Vice President of Scientific Affairs.
"During the quarter, we made significant progress in our transition into a specialty pharmaceutical company focused on the topical pain space," said Dan Chicoine, Chairman and Co-Chief Executive Officer of Nuvo Research. "The integration of ZARS continues to proceed well and we have recently accomplished important milestones for several of our development programs highlighted by positive Phase 2 data for Pennsaid Viscous Solution and E.U. validation of our MAA for Pliaglis."
During the second quarter of 2011, U.S. prescriptions of Pennsaid grew 17% quarter-over-quarter to a record of approximately 40,000 prescriptions according to IMS Health. Since the launch of the product in the U.S. by Covidien in late April 2010, prescriptions have increased in each successive quarter. Data from IMS Health indicates that an average 1.28 bottles of Pennsaid per script were dispensed in the quarter.
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2011 decreased slightly to $3.8 million compared to $4.2 million for the three months ended June 30, 2010. In the current quarter, the increased royalty revenue earned on Pennsaid sales in the U.S. and Canada and Synera® sales in Europe, partially offset a decrease in product sales. The decrease in product sales is due to a significant quantity of Pennsaid samples that were sold to Covidien in the comparative quarter as they prepared for the U.S. Pennsaid launch. Total revenue for the six months ended June 30, 2011 was $7.6 million compared to $8.3 million for the six months ended June 30, 2010.
Gross margin on product sales decreased to $0.5 million for the three months ended June 30, 2011 from $1.2 million for the three months ended June 30, 2010. The decrease in gross margin was primarily attributable to the decrease in Pennsaid product sales and the impact of the newly acquired Synera product sales which lower associated gross margin at current sales levels given certain fixed costs attributable to the brand. For the six months ended June 30, 2011, gross margin on product sales was $1.5 million compared to $2.2 million for the six months ended June 30, 2010.
Total operating expenses were relatively unchanged at $4.7 million and $9.3 million for the three and six months ended June 30, 2011 compared to $4.8 million and $9.2 million for the three and six months ended June 30, 2010.
R&D expenses decreased to $2.0 million and $4.1 million for the three and six months ended June 30, 2011 compared to $2.3 million and $4.6 million for the three and six months ended June 30, 2010. The decreases in the three and six months ended June 30, 2011 related to the closure of the Company's San Diego research facility at the end of January 2011. Partially offsetting this decrease were costs related to the preparation of filing the IND with the FDA for NRI-ANA and the costs related to the preparation of the MAA for Pliaglis.
SG&A expenses were relatively unchanged at $2.6 million for the three months ended June 30, 2011 compared to $2.5 million for the three months ended June 30, 2010. SG&A expenses increased to $5.2 million for the six months ended June 30, 2011 compared to $4.6 million for the six months ended June 30, 2010. The increase is related to the costs associated with the ZARS acquisition.
The gain on the ZARS Contingent Consideration relates to the change in terms of the contingent consideration. The Contingent Consideration was originally structured as promissory notes payable to the former shareholders of ZARS, if the Company did not receive shareholder approval for the issuance of additional shares. The Company's shareholders approved the issuance of contingent shares and therefore the liability related to the ZARS Contingent Consideration was no longer payable by the notes and only payable in shares, and accordingly, the liability was derecognized. The equity on June 21, 2011 was valued based on the Company's share price of $0.07 on June 21, 2011, $3.3 million was recorded in contributed surplus and a gain of $1.8 million was recorded in the period representing the difference between the fair value of the ZARS Contingent Consideration at the Acquisition Date and fair value at the date of shareholder approval for the ZARS Contingent Consideration to be issued in shares of the Company.
Net losses were $0.6 million and $2.9 million for the three and six months ended June 30, 2011 compared to $2.8 million and $9.3 million for the three and six months ended June 30, 2010. The significant decrease in net loss in the quarter relates to a $1.8 million gain recognized on the change in terms of the contingent consideration related to the ZARS acquisition. In the six month period, the significant improvement in net loss is related to the above mentioned gain and a $3.5 million loss recognized on the early redemption of debentures in the quarter ended March 31, 2010.
Cash and cash equivalents were $21.2 million as at June 30, 2011.
Cash used in operating activities was $4.3 million for the three months ended June 30, 2011 compared to $3.0 million for the three months ended June 30, 2010. The increase relates to an investment in non-cash working capital in the current quarter compared to a recovery in the comparative period mainly related to the ZARS acquisition. For the six months ended June 30, 2011, cash used in operating activities was $5.4 million compared to $8.1 million for the six months ended June 30, 2010. The improvement relates to a significantly lower net loss and a smaller investment in non-cash working capital.
Net cash provided by investing activities totaled $1.4 million for both the three and six months ended June 30, 2011 compared to cash used in investing activities of $0.4 million and $0.6 million for the three and six months ended June 30, 2010. The increase was entirely attributable to cash acquired from the ZARS acquisition.
Net cash used in financing activities totaled $3.0 million for both the three and six months ended June 30, 2011 compared to $14,000 and $33,000 for the three and six months ended June 30, 2010. The Company paid the entire balance of an acquired bank debt from the ZARS acquisition that was payable on the acquisition Date.
Management to Host Conference Call
Management will host a conference call to discuss the second quarter results on Wednesday, August 10, 2011 at 4:30 p.m. EDT. Following management's presentation, there will be a question and answer session, at which time the operator will direct participants to the correct procedure for submitting questions. To participate in the conference call, please dial 647-427-7450 or 1-888-231-8191. 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 Wednesday, August 17, 2011 by calling 416-849-0833 or 1-855-859-2056, reference number 74229936.
A live audio webcast of the conference call will be available through www.nuvoresearch.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 Research Inc.
Nuvo Research is a publicly traded, Canadian specialty pharmaceutical company, headquartered in Mississauga, Ontario. The Company is building a portfolio of products for the treatment of pain through internal research and development and by in-licensing and acquisition. The Company's Pain Group, located in West Chester, Pennsylvania, is focused on the development and commercialization of topically delivered pain products. The Company's product portfolio includes Pennsaid, Pliaglis and Synera. Pennsaid, a topical non-steroidal anti-inflammatory drug (NSAID), is used to treat the signs and symptoms of osteoarthritis of the knee. Pennsaid is sold in the United States by Mallinckrodt Inc., a Covidien company (NYSE: COV), in Canada by Paladin Labs Inc. (TSX:PLB) and in several European countries. Pliaglis is a topical local anesthetic cream, which is U.S. Food and Drug Administration (FDA) approved to provide topical local analgesia for superficial dermatological procedures. The Company has licensed worldwide marketing rights to Pliaglis to Galderma Pharma S.A., a global specialty pharmaceutical company focused on dermatology. Synera is a topical patch that combines lidocaine, tetracaine and heat, approved in the United States to provide local dermal analgesia for superficial venous access and superficial dermatological procedures and in Europe, for surface anaesthesia of normal intact skin. Nuvo currently markets Synera in the United States and its licensing partner, EuroCept International B.V., has initiated a pan-European launch of Synera (under the name Rapydan) in several European countries. Through its subsidiary, Nuvo Research GmbH, based in Leipzig, Germany, the Company is also developing the compound WF10, for the treatment of immune related diseases. For more information, please visit www.nuvoresearch.com.
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, 2010. Nuvo disclaims any intention or obligation to update or revise any forward-looking statements, whether as 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.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
As at June 30,
As at December 31,
|(Canadian dollars in thousands)||$||$|
|Cash and cash equivalents||21,225||28,269|
|Other current assets||867||2,143|
|TOTAL CURRENT ASSETS||27,017||35,228|
|Property, plant and equipment||2,629||2,016|
|LIABILITIES AND EQUITY|
|Accounts payable and accrued liabilities||5,147||4,203|
|Current portion of finance lease obligations||3||63|
|TOTAL CURRENT LIABILITIES||7,672||5,322|
|Finance lease obligations||9||11|
|Equity attributable to owners of the parent|
|Accumulated other comprehensive income (AOCI)||(148)||(257)|
|TOTAL LIABILITIES AND EQUITY||49,572||37,244|
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended
Six Months Ended
|(Canadian dollars in thousands, except per share and share figures)||$||$||$||$|
|Cost of goods sold||1,461||2,115||3,078||4,363|
|Gross margin on product sales||537||1,196||1,501||2,215|
|Research and other contract revenue||77||185||116||409|
|Research and development||2,027||2,278||4,126||4,620|
|Selling, general and administrative expenses||2,637||2,531||5,154||4,554|
|Foreign currency loss (gain)||(14)||160||(26)||518|
|Gain on ZARS contingent consideration||(1,770)||-||(1,770)||-|
|Loss on early redemption of debentures||-||-||-||3,547|
|Net loss before income taxes||(536)||(2,827)||(2,879)||(9,328)|
|Other comprehensive income (loss)|
|Unrealized gains (losses) on translation of foreign operations||(19)||(41)||18||(156)|
|TOTAL COMPREHENSIVE LOSS||(577)||(2,873)||(2,905)||(9,489)|
|Net income (loss) attributable to:|
|Owners of the parent||(112)||(2,589)||(2,346)||(8,819)|
|Total comprehensive income (loss) attributable to:|
|Owners of the parent||(100)||(2,685)||(2,237)||(9,120)|
|Net Loss per common share - basic and diluted||(0.001)||(0.007)||(0.007)||(0.023)|
Average number of common shares outstanding
- basic and diluted (millions)
NUVO RESEARCH INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Three months ended
Six months ended
|(Canadian dollars in thousands)||$||$||$||$|
|Items not involving current cash flows:|
|Loss on early redemption of debentures||-||-||-||3,547|
|Gain on ZARS contingent consideration||(1,770)||-||(1,770)||-|
|Depreciation and amortization||163||117||316||229|
|Deferred license revenue recognized||(423)||(579)||(508)||(1,120)|
|D Deferred royalty revenue, net of royalties earned||(95)||(188)||(168)||(188)|
|S Stock-based compensation||23||33||195||56|
|Accretion of interest on debentures||-||-||-||31|
|Unrealized foreign exchange loss (gain)||(70)||10||(57)||424|
|Deferred proceeds on research contracts||-||-||-||14|
|Net change in non-cash working capital||(1,617)||477||(518)||(1,813)|
|CASH USED IN OPERATING ACTIVITIES||(4,338)||(2,950)||(5,424)||(8,142)|
|Acquisition of ZARS Pharma, Inc.||1,477||-||1,477||-|
|Acquisition of property, plant and equipment||(47)||(370)||(80)||(604)|
|CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES||1,430||(370)||1,397||(604)|
|Repayment of acquired debt||(3,022)||-||(3,022)||-|
|Issuance of common shares||-||5||29||5|
|Repayments of finance lease obligations||(1)||(19)||(61)||(38)|
|CASH USED IN FINANCING ACTIVITIES||(3,023)||(14)||(3,054)||(33)|
|Effect of exchange rate changes on cash and cash equivalents||41||(53)||37||(456)|
|Net change in cash and cash equivalents during the period||(5,890)||(3,387)||(7,044)||(9,235)|
|Cash and cash equivalents, beginning of period||27,115||36,254||28,269||42,102|
|CASH AND CASH EQUIVALENTS, END OF PERIOD||21,225||32,867||21,225||32,867|
|Income taxes paid1||20||-||42||-|
For further information:
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