Nuvo Pharmaceuticals Announces 2018 Third Quarter Results
MISSISSAUGA, ON, Nov. 8, 2018 /PRNewswire/ - Nuvo Pharmaceuticals Inc.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
Third Quarter Financial Summary
"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."
The Aralez Transaction
Table of Selected Financial Results
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
The following is a summary of how EBITDA and Adjusted EBITDA are calculated:
Management to Host Conference Call/Webcast
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.
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.
Company Codes: OTC-QX:NRIFF, Toronto:NRI