MISSISSAUGA, ON, Feb. 27 /PRNewswire-FirstCall/ - Nuvo Research Inc. , a Canadian drug development company focused on the research and development of drug products that are delivered to and through the skin using its topical and transdermal drug delivery technologies, today announced its financial and operational results for the year and the fourth quarter ended December 31, 2008.
Revenue, consisting of product sales, license fee revenue, and research and other contract revenue, for the three-months ended December 31, 2008 increased 41% to $3.1 million compared with $2.2 million for the three-months ended December 31, 2007. The increase was attributable to many factors including a $0.5 million increase in product sales of both Pennsaid and WF10 based products, the recognition of additional licensing fee revenue and research revenue earned on a collaboration agreement with a Fortune Global 500 company that develops and markets skin care products. For the year, revenue increased 49% to $10.7 million versus $7.2 million. This is primarily due to higher Pennsaid product sales in Greece where 2008 was the first full year of selling the product in this market after its launch during the second quarter of 2007 and an increase of $1.2 million in licensing fee revenue.
Gross margin on product sales was $1.0 million for the three-months ended December 31, 2008 compared to $0.6 million for the comparable quarter in 2007. The increase in gross margin is primarily attributable to a 22% increase in Pennsaid product sales to new quarterly high. For the year, gross margin increased to $3.2 million compared to $1.5 million for the year ending December 31, 2007. The increase in gross margin is primarily attributable to the 37% increase in Pennsaid sales, the 24% increase in WF10 based product sales and significant improvements and efficiencies achieved in the Pennsaid manufacturing process, partially offset by price increases in the raw materials used to compound and package Pennsaid and the strengthening US dollar. The overall gross margin percentage was 40% in 2008 versus 26% in 2007.
Total operating expenses for the three-month period ended December 31, 2008 increased to $4.9 million versus $4.2 million for the three-months ended December 31, 2007. The $0.7 million increase in operating expenses is due to higher research and development expenses, the $0.2 million impairment charge recorded against certain of the Company's intangible assets and increases in selling, general and administrative costs and net interest expense, partially offset by $0.1 million foreign exchange gain in 2008. Total operating expenses for year ended December 31, 2008 were $17.0 million, an increase of 8% compared to $15.7 million for the year ended December 31, 2007. The increase from 2007 relates to an increase in net interest expense and higher research and development spending, offset partially by lower SG&A costs. This highlights the impact of the Company's efforts during the third and fourth quarters of 2007 to focus its resources on research activities rather than administrative costs.
Research and development expenses increased by 17% to $2.5 million for the three months ended December 31, 2008 compared to $2.1 million for the three months ended December 31, 2007. For the year ended December 31, 2008, research and development costs increased 11% to $9.3 million compared to $8.3 million for the year ended December 31, 2007. The majority of the spending in the fourth quarter and the year related to the completion of the Short and Long-Term Studies required to address the conditions raised in the Approvable Letter, costs associated with the Phase 2 trial of WF10 as an adjuvant therapy for pancreatic cancer, the preclinical development of the Company's pipeline candidates and costs relating to expanding the Company's research capabilities in San Diego and a pain advisory conference hosted by the Company.
SG&A expenses increased by 9% to $1.6 million for the three months ended December 31, 2008 compared to $1.5 million for the three months ended December 31, 2007. During the quarter, the impact of lower ongoing personnel costs and the savings associated with closing the Company's international marketing office in Barbados were more than offset by increased spending on business development activities as the Company expanded efforts to sign a U.S. licensee for Pennsaid and higher professional fees related to the Squire Tax Reassessment. For the year ended December 31, 2008, SG&A costs decreased 5% to $5.2 million compared to $5.5 million for the year ended December 31, 2007. The decrease is primarily attributable to activities undertaken during the third and fourth quarters of 2007, including the closure of the Company's international marketing office in Barbados and staff reductions at the corporate head office, offset partially by additional severance costs incurred as the Company continued to strengthen its team, increased spending on business development activities, incurred higher professional fees and the costs related to the Squire Tax Reassessment.
For the three months ended December 31, 2008, the net loss decreased to $2.4 million from $3.3 million for the three months ended December 31, 2007. Included in the results for the quarter is a non-cash gain of $0.9 million from the change in the estimate of the amount of the liability related to the loans from Leadenhall. Excluding the impact of this item, the net loss would have declined slightly to $3.3 million in the current quarter compared to $3.4 million a year ago. For the year ended December 31, 2008, the net loss declined by 15% to $10.6 million from $12.4 million for the year ended December 31, 2007.
Cash and cash equivalents on hand at December 31, 2008 of $15.2 million were $3.7 million less than the $18.9 million at September 30, 2008. The decrease is almost entirely attributable to cash used by operating activities.
Cash used in operating activities of $4.2 million was higher than the $2.7 million used in the three-month comparative period ended December 31, 2007 due primarily to a higher investment in non-cash working capital during the fourth quarter of 2008. The significant investment in non-cash working capital relates primarily to the significant increase in accounts receivable attributable to the achieving record quarterly sales of Pennsaid to Europe during the fourth quarter of 2008. For the year ended December 31, 2008 funds used in operating activities decreased to $9.1 million from $12.3 million.
Detailed financial statements and the MD&A are available at www.nuvoresearch.com or www.sedar.com.
Notice of Annual and Special Meeting
Nuvo will be holding its Annual and Special Meeting of Shareholders on Thursday, April 30, 2009 at 9:00 a.m. (EST) at the Gallery of the Toronto Stock Exchange (TSX) Broadcast & Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario, Canada.
About Pennsaid
Pennsaid is a topical non-steroidal anti-inflammatory drug used for the treatment of osteoarthritis. Pennsaid allows the active ingredient, diclofenac, to be delivered to a specific site via the surface of the skin and thus limits complications associated with systemic delivery. According to published clinical trials, Pennsaid is as effective as the maximum daily dose of comparable oral medication at relieving pain and stiffness associated with osteoarthritis of the knee, as well as improving overall well-being. There are more than 27 million Americans suffering from osteoarthritis, a very painful and debilitating condition, and the United States market for this condition is estimated at US$4 billion annually.
About Nuvo Research Inc.
Nuvo is focused on the research and development of drug products delivered to and through the skin using its topical and transdermal drug delivery technologies. Nuvo's lead product is Pennsaid, a topical non-steroidal anti-inflammatory drug used for the treatment of osteoarthritis. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of topical and transdermal products targeting a variety of indications.
Nuvo Research Inc. is a publicly traded, Canadian pharmaceutical company headquartered in Mississauga, Ontario, with manufacturing facilities in Varennes, Quebec and Wanzleben, Germany and a research and development Center in San Diego, California. For more information, please visit www.nuvoresearch.com.
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. The Company 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 the Company's Annual Information Form for the year ended December 31, 2007. The Company 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.
Summary financial statements attached:
CONTACT: about Nuvo, please contact: Media and Investor Relations, Adam
Peeler, The Equicom Group Inc., Tel: (416) 815-0700 x225, email:
apeeler@equicomgroup.com
