Nuvo Research Inc. Announces 2015 Second Quarter Results

MISSISSAUGA, ON, Aug. 5, 2015 /PRNewswire/ - Nuvo Research Inc. (TSX:NRI), a specialty pharmaceutical company with a diverse portfolio of topical and immunology products, today announced its financial and operational results for the second quarter ended June 30, 2015.

Second Quarter and Recent Corporate Developments:

Pennsaid^® 2%

• U.S. prescriptions of Pennsaid 2% increased from approximately 31,000 in Q1 to 76,000 in Q2 according to IMS Health. Under the terms of an exclusive manufacturing agreement, the Company earns revenue from U.S. product sales of Pennsaid 2% to Horizon Pharma (Horizon), which acquired the U.S. Pennsaid 2% rights from the Company in Q4 2014. Since its launch by Horizon on January 1, 2015, U.S. prescriptions for Pennsaid 2% have increased significantly from 18,000 prescriptions in the fourth quarter of 2014;

• In June, the Company received approval from the German Federal Institute for Drugs and Medical Devices (BfArM) to conduct a Phase 3 clinical trial in Germany of Pennsaid 2% for the treatment of acute pain to support regulatory approval applications for Pennsaid 2% in international jurisdictions. The trial commenced in July 2015 and topline results are expected in Q4 2015 or Q1 2016; and

• The Company retained PricewaterhouseCoopers Corporate Finance Inc. (PwC) to assist it in securing international license agreements for Pennsaid 2%. PwC will assist Nuvo in identifying, contacting and qualifying potential licensees for available territories using its international offices and contacts. An information sheet outlining the licensing opportunity has been posted to the Company’s website at www.nuvoresearch.com.

WF10

• The Company has completed dosing of its Phase 2 trial using WF10 for the treatment of allergic rhinitis. This trial was expected to enroll approximately 146 patients; however, due to the strict selection criteria that included the use of an Environmental Exposure Chamber (EEC) and a tight enrollment window, 74 patients have completed dosing and commenced the field portion of the trial. Topline results are expected to be available in late Q4 2015 or early Q1 2016. The Company believes that the number of patients being studied is sufficient to analyze the safety and efficacy of WF10 in the treatment of allergic rhinitis and to make a decision on its further development.

• “We are making great progress executing our business strategy,” said Dan Chicoine, Nuvo’s Chairman and Co-CEO. “Pennsaid 2% U.S. sales by Horizon continue to grow and we anticipate growth to continue, generating additional cash flow from our Varennes manufacturing facility. The U.S. success of Pennsaid 2% validates it as a high potential product and supports our recently launched international out-licensing initiatives supported by PwC. In Q2, we initiated important clinical trials of WF10 and Pennsaid 2% and should have the results by the end of the year or in early 2016. Finally, we continue to aggressively explore a number of strategic options that we believe will unlock unrecognized value in Nuvo for the benefit of Nuvo shareholders.”

• “Our financial results continue to benefit from an increased gross margin on product sales as a result of Horizon’s success in growing Pennsaid 2% sales in the U.S.,” said Stephen Lemieux, Nuvo’s Vice-President and Chief Financial Officer. “Our sales to Horizon in the quarter were slightly lower than Q1, as Horizon filled prescriptions mainly from inventory that we shipped in Q1 when it was stocking its distribution channels. For the second half of 2015, based on current forecasts, we expect production sales of Pennsaid 2% to Horizon to increase significantly to be more in-line with prescriptions dispensed and to provide additional cash flow to the Company’s operations.”

Table of Selected Financial Results
For further details on the results, please refer to the Management, Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company’s website (www.nuvoresearch.com).

Q2 Financial Highlights

Product sales, which represent the Company’s sales of Pennsaid 2%, Pennsaid, WF10 and HLT bulk to its licensees and distributors, were $2.9 million for the three months ended June 30, 2015 compared to $2.2 million for the three months ended June 30, 2014. The increase in product sales was primarily related to higher product sales of Pennsaid 2% to Horizon, slightly offset by lower Pennsaid product sales. Product sales of Pennsaid 2% were $2.1 million for the three months ended June 30, 2015 compared to $0.4 million for the three months ended June 30, 2014. Total product sales for the six months ended June 30, 2015 were $6.8 million compared to $3.4 million in the comparative period.

Other revenue, consisting of royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2015 was $0.3 million compared to $1.7 million for the three months ended June 30, 2014. The decrease in other revenue was primarily related to a decrease in royalty revenues as the Company no longer receives a royalty on Pennsaid 2% net sales in the U.S. Other revenue for the six months ended June 30, 2015 was $1.0 million compared to $3.3 million in the comparative period.

Total operating expenses for the three months ended June 30, 2015 increased to $9.2 million versus $6.0 million for the three months ended June 30, 2014. The increase in total operating expenses related to higher cost of goods sold (COGS) due to an increase in product sales and higher research and development expenses (R&D) due to costs incurred on the Company’s clinical studies, partially offset by net interest income. Total operating expenses for the six months ended June 30, 2015 increased to $14.3 million from $11.7 million in the comparative period.

COGS for the three months ended June 30, 2015 was $1.9 million compared to $1.5 million for the three months ended June 30, 2014. The increase in COGS in the quarter was associated with increased Pennsaid 2% product sales. The increase in product sales improved the gross margin to $1.0 million or 35% for the three months ended June 30, 2015 compared to a gross margin of $0.7 million or 32% for the three months ended June 30, 2014. For the six months ended June 30, 2015, COGS was $4.5 million compared to $2.7 million in the comparative period. Gross margin on product sales for the six months ended June 30, 2015 increased by $1.7 million to $2.4 million or 35% compared to $0.7 million or 19% for the six months ended June 30, 2014.

R&D expenses increased to $4.3 million for the three months ended June 30, 2015 compared to $1.5 million for the three months ended June 30, 2014. In the current quarter, the increase related to the costs incurred for the Phase 2 trial using WF10 for the treatment of allergic rhinitis and the Pennsaid 2% Phase 3 trial for the treatment of acute pain. For the six months ended June 30, 2015, R&D expenses increased to $6.3 million compared to $3.4 million for the six months ended June 30, 2014.

General and administrative (G&A) expenses increased to $3.1 million for the three months ended June 30, 2015 compared to $2.9 million for the three months ended June 30, 2014. The increase in the quarter related to a $1.0 million increase in stock-based compensation (SBC) primarily from the revaluation of cash settled SBC to market value, offset by a decrease in professional fees related to the Company’s litigation with Mallinckrodt in the comparative period. G&A expenses for the six months ended June 30, 2015 were $3.7 million compared to $5.3 million for the six months ended June 30, 2014.

Net loss was $6.0 million for the three months ended June 30, 2015 compared to $2.3 million for the three months ended June 30, 2014. The increased net loss was attributable to lower royalty revenue and increased R&D expenditures of which $3.0 million related to the WF10 Phase 2 trial and the Pennsaid 2% Phase 3 trial, partially offset by a $0.3 million increase in gross margin from product sales and net interest income compared to net interest expense in the comparative period. Net loss was $6.2 million for the six months ended June 30, 2015 compared to $5.1 million for the six months ended June 30, 2014.

Cash and short-term investments were $51.8 million at June 30, 2015, a decrease of $6.5 million compared to $58.3 million at December 31, 2014. The cash burn of $6.5 million includes R&D expenses of $4.3 million, of which $2.3 million was external spending on the WF10 Phase 2 trial and the Pennsaid 2% Phase 3 trial. The Company believes that the cash burn in the second half of the year, which will include approximately $4.2 million of external R&D spending, will be consistent to that experienced in the first half of 2015, as we complete the trials for WF10 and Pennsaid 2%.

The number of common shares outstanding as at June 30, 2015 was 10,916,017.

About Nuvo Research Inc.
Nuvo (TSX:NRI) is a specialty pharmaceutical company with a diverse portfolio of products and technologies. The Company operates two distinct business units: the Topical Products and Technology (TPT) Group and the Immunology Group. The TPT Group currently has four commercial products, a pipeline of topical and transdermal products focusing on pain and dermatology and multiple drug delivery platforms that support the development of patented formulations that can deliver actives into or through the skin. The Immunology Group has two commercial products and an immune system modulation platform that supports the development of drug products that modulate chronic inflammation processes resulting in a therapeutic benefit. For additional company information visit www.nuvoresearch.com.

Forward-Looking Statements
Certain statements in this press release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include, but are not limited to statements concerning the Company’s future objectives, strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include general business and economic uncertainties and adverse market conditions as well as other risk factors included in the Company’s Annual Information Form dated February 19, 2015 under the heading “Risks Factors” and as described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. This list is not exhaustive of the factors that may impact the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’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 neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements contained herein are made as of the date of this press release and except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Nuvo Research Inc.