MISSISSAUGA, ON, Aug. 2 /PRNewswire-FirstCall/ - Nuvo Research Inc. today announced its fiscal and operational results for the second quarter ended June 30, 2007.
Highlights - Subsequent to quarter end, the Company received official minutes from the U.S. Food and Drug Administration (“FDA”) of a telephone conference meeting regarding the Approvable Letter for Pennsaid, its topical anti-inflammatory drug for the treatment of the symptoms of osteoarthritis. The minutes confirmed the contents of informal communications received from the FDA which were disclosed in a news release on June 19, 2007. Based on this confirmation, Nuvo will commence all requested long-term dermal animal studies. The longest study may be completed post approval, provided no safety concerns have arisen from any of the studies prior to resubmitting the application for Pennsaid approval. Nuvo has commenced other studies to respond to the Approvable Letter and expects to be in a position to file a complete resubmission of its application for Pennsaid approval with the FDA in the first half of 2009 and be eligible to receive final marketing approval in the second half of 2009. There can be no assurance that these anticipated timelines will be achieved, as they are dependant on a number of factors, including successful completion of other shorter studies to address other conditions within the Approvable Letter. - Nuvo continued to validate, broaden and extend its proprietary formulations platform technology, multiplexed molecular penetration enhancer (MMPE(TM)) technology. This process has yielded several attractive transdermal product possibilities. Patent protection for several MMPE(TM) systems have been applied for. - Nuvo completed a bought deal financing for gross proceeds of $20 million, which attracted some leading U.S. based institutional biotechnology investors.
“Our top priority remains obtaining approval for Pennsaid in the U.S. With clarification on the path forward from the FDA, we have a better idea of what needs to be done to obtain final approval of Pennsaid and we remain confident that it can be achieved,” said Henrich Guntermann, President and CEO. “In parallel, we continue to develop our pipeline of transdermal products focusing primarily on pain with our high-throughput technology developed by our fqubed, Inc. subsidiary in San Diego.”
Financial Results: Three-months Three-months Six-months Six-months ended ended ended ended June 30, June 30, June 30, June 30, 2007 2006 2007 2006 ------------------------------------------------------------------------- Revenue $ 1,435 $ 1,360 $ 2,413 $ 1,993 Loss from Operations (3,034) (3,762) (6,521) (7,480) Net Loss $ (3,034) $ (3,847) $ (6,521) $ (6,618) -------------------------------------------------------------------------
Product sales and research contract revenue for the three-months ended June 30, 2007 decreased 3% to $1.2 million compared to the three-months ended June 30, 2006. This decrease is primarily the result of slightly lower Pennsaid revenue of $881,000 during the three-months ended June 30, 2007 compared to $932,000 for the three-months ended June 30, 2006. The higher Pennsaid revenue in the prior year quarter was primarily due to a spike in Canadian sales during June 2006 as our distributor, Squire Pharmaceuticals (“Squire”), introduced Pennsaid in its new product format. This new format consisted of a 120ml twin pack (two 60 ml bottles) versus a single 60ml bottle. While this level of sales was not repeated in June 2007 Canadian sales were nonetheless encouraging as they grew versus the first quarter of 2007. Partially offsetting the decrease versus a year ago was the increase in European sales as Vianex S.A. launched Pennsaid in Greece during February 2007 and sales to our Italian distributor increased. Product sales and research contract revenue for the six-months ended June 30, 2007 increased to $1.9 million compared to $1.7 million for the six-months ended June 30, 2006. This increase is primarily a result of the launch of Pennsaid in Greece and higher sales to our Italian distributor, partially offset by slightly lower sales in Canada.
During the quarter and six-months ended June 30, 2007, Nuvo recorded $250,000 and $500,000 in license fee revenue that was previously deferred, compared with $144,000 and $288,000 for the comparable quarter and six-months ended June 30, 2006. This represents the systematic recognition of a portion of the up-front fees received from Squire in 2005 and 2006 for the Canadian marketing rights for Pennsaid.
Total operating expenses decreased by 11% to $3.9 million and 5% to $8.0 million for the three and six-months ended June 30, 2007 compared to $4.3 million and $8.4 million for the comparable periods last year. This decrease is primarily due to lower research and development costs, stock-based compensation and interest expense offsetting increases in selling, general and administrative costs.
Included in operating expenses are research and development (R&D) costs which were $1.7 million for the three-month period ended June 30, 2007, compared with $2.2 million for the three-month period ended June 30, 2006. In the current quarter costs declined and were lower than expected as the Company delayed spending on some of the Approvable Letter related studies as it attempted to clarify the path to approval with the FDA. As a result of discussions in June 2007, that were confirmed in FDA minutes received in July 2007, the Company now has the clarity it requires to commence the longer term dermal animal studies. As a result, research and development spending for the remainder of 2007 is expected to be significantly higher than in 2006. In the comparative period R&D costs were higher than in 2007 as the Company employed a higher level of clinical, regulatory and research staff as it completed all work related to the FDA submission for Pennsaid and incurred filing fees related to the submission.
Research and developments costs for the six-month period declined to $3.4 million compared to $3.6 million for the six-month period ended June 30, 2006. The decrease is attributable to the delayed spending of the Approvable Letter related studies as discussed above, partially offset by the costs related to developing the plan (including all necessary studies) to address each of the FDA’s issues as outlined in the Approvable Letter and continued activity at fqubed as the Company continues to validate, broaden and extend its proprietary multiplexed molecular penetration enhancer (MMPE(TM)) formulations platform technology. The MMPE(TM) technology, developed through internal HTE campaigns, uses special combinations of molecular penetration enhancer (MPE(TM)) materials to permeabilize the skin for enhanced delivery of a given drug. The Company is currently considering exploitation of the MMPE(TM) technology for onychomycosis, for which fungal kill assays were completed in the first quarter of 2007. In the comparable period ending June 30, 2006 the Company completed the analysis of the Pennsaid Phase III efficacy and safety trial (designated ‘Study 112') and the Pennsaid Phase III long-term open-label safety trial (designated ‘Study 112E’) which were a key part of the Company’s June 2006 FDA submission for Pennsaid.
The loss from operations declined to $3.0 million and $6.5 million for the three and six-months ended June 30, 2007 compared to $3.8 million and $7.5 million in the three and six-months ended June 30, 2006. The decrease in the loss was a result of the increased margin on product sales and research contract revenue, an increase in licensing fee revenue, reduced net interest expense, lower research and development costs and stock-based compensation expense offset partially by higher SG&A costs.
Cash and cash equivalents decreased to $9.3 million at June 30, 2007, compared to $11.2 million at December 31, 2006 as cash used by operating and investing activities of $6.7 million more than offset the $4.8 million of cash provided by financing activities.
During the second quarter of 2007, the Company used $0.2 million to fund scheduled debt repayments. In the comparable period, net cash provided by financing activities totaled $13.5 million as the Company completed a bought deal financing consisting of 37.5 million units issued at a price of $0.40 per Unit for net proceeds of $13.7 million.
For the six-month period ending June 30, 2007, net cash provided by financing activities totaled $4.8 million and consisted primarily of $5.3 million in proceeds from the exercise of warrants offset by $555,000 in debt repayments. In the comparable six-month period ended June 30, 2006 net cash provided by financing activities totaled $17.1 million and consisted primarily of $13.7 million relating to the June 2006 bought deal discussed above and the January 2006 transactions whereby the Company sold additional Pennsaid licensing rights in Canada for proceeds of $3.75 million.
Subsequent Event
On July 13, 2007, the Company closed a bought deal equity financing that was announced in June 2007 for a total of 100 million units (“Units”) issued at a price of $0.20 per Unit for gross proceeds of $20 million (“July Bought Deal”). Each Unit consisted of one common share and one-half of a common share purchase warrant of the Company, each whole warrant entitling the holder thereof to acquire one common share at a price of $0.30 per share until July 13, 2009. Net cash proceeds are estimated to be $18.4 million, after deducting the underwriter’s fee of 6% and the estimated expenses of the offering. As part of the transaction the underwriters will receive 5 million warrants (the “Underwriter Warrants”) for services provided in conjunction with the July Bought Deal. The Underwriter Warrants are each exercisable into one Unit at a price of $0.20 per Unit for a period of 24 months following the Closing Date.
Detailed financial statements and the MD&A are available at www.nuvoresearch.com or www.sedar.com.
About Pennsaid
Pennsaid(R) is a topical non-steroidal anti-inflammatory drug (NSAID) used for the treatment of osteoarthritis and is currently approved for sale in Canada and several European countries. Pennsaid(R) allows the diclofenac solution 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(R) 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 is currently no topical NSAID product approved in the approximately $4 billion U.S. osteoarthritis pain relief market. In December 2006, the U.S. Food and Drug Administration issued an approvable letter that indicated Pennsaid(R) is approvable subject to Nuvo satisfying certain conditions.
About Nuvo Research Inc.
Nuvo is focused on developing innovative site-specific therapeutics that are delivered topically using the Company’s skin-penetrating technologies. Nuvo’s lead product is Pennsaid(R), a topical non-steroidal anti-inflammatory drug (NSAID) used for the treatment of osteoarthritis. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of 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 facility in San Diego, California. For more information, please visit www.nuvoresearch.com.
This release may contain forward-looking statements, subject to risks and uncertainties beyond management’s control. Actual results could differ materially from those expressed here. Risk factors are discussed in the Company’s annual information form filed with the securities commissions in each of the provinces of Canada. The Company undertakes no obligation to revise forward-looking statements in light of future events.
Summary financial statements attached: NUVO RESEARCH INC. CONSOLIDATED BALANCE SHEETS As at As at June 30, December 31, 2007 2006 (thousands of Canadian dollars) Unaudited Audited $ $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 9,258 11,213 Accounts receivable 1,009 968 Other receivable 375 375 Inventories 1,091 1,051 Prepaid expenses and other 904 892 ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 12,637 14,499 Property, plant and equipment 2,883 3,120 Deferred financing costs 128 - ------------------------------------------------------------------------- TOTAL ASSETS 15,648 17,619 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT Accounts payable and accrued liabilities 2,569 3,008 Short term loan 569 557 Deferred revenue 1,367 1,352 Current portion of long term debt and capital lease obligations 166 677 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 4,671 5,594 Deferred revenue 5,952 6,552 Long term debt and capital lease obligations 270 337 Debentures 2,145 1,999 ------------------------------------------------------------------------- TOTAL LIABILITIES 13,038 14,482 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY Common shares 173,812 165,400 Warrants 6,482 9,402 Contributed surplus 5,387 4,885 Accumulated other comprehensive income 114 114 Deficit (183,185) (176,664) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS’ EQUITY 2,610 3,137 ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 15,648 17,619 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT Three-months Six-months Unaudited ended ended (thousands of Canadian June 30, June 30, June 30, June 30, dollars except per 2007 2006 2007 2006 share amounts) $ $ $ $ ------------------------------------------------------------------------- REVENUE Product and research contract revenue 1,185 1,216 1,913 1,705 Licensing fees 250 144 500 288 ------------------------------------------------------------------------- 1,435 1,360 2,413 1,993 ------------------------------------------------------------------------- EXPENSES Cost of goods sold 587 777 948 1,030 Research and development 1,684 2,161 3,422 3,640 Selling, general and administrative expenses 1,699 1,437 3,548 3,152 Stock-based compensation 211 311 374 707 Amortization of property, plant, and equipment 215 196 426 373 Foreign currency gain (91) (63) (81) (36) Interest, net 164 303 297 607 ------------------------------------------------------------------------- 4,469 5,122 8,934 9,473 ------------------------------------------------------------------------- LOSS FROM OPERATIONS (3,034) (3,762) (6,521) (7,480) Gain on sale of assets - - - 947 Impairment charge - (135) - (135) ------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (3,034) (3,897) (6,521) (6,668) ------------------------------------------------------------------------- NET INCOME FROM DISCONTINUED OPERATIONS - 50 - 50 ------------------------------------------------------------------------- NET LOSS FOR THE PERIOD AND TOTAL COMPREHENSIVE LOSS (3,034) (3,847) (6,521) (6,618) Deficit, beginning of period (180,151) (166,420) (176,664) (163,649) ------------------------------------------------------------------------- DEFICIT, END OF PERIOD (183,185) (170,267) (183,185) (170,267) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss per common share - basic and diluted (0.01) (0.03) (0.03) (0.05) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three-months Six-months Unaudited ended ended (thousands of June 30, June 30, June 30, June 30, Canadian dollars) 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss from continuing operations (3,034) (3,897) (6,521) (6,668) Items not involving current cash flows: Amortization 215 196 426 373 Deferred revenue recognized (307) (374) (583) (524) Stock-based compensation and payments 211 311 506 707 Impairment charge - 135 - 135 Accretion of interest on debentures 158 138 303 269 Gain on sale of assets - - - (947) Other (57) - (69) - Net change in non-cash working capital balances (687) 236 (527) 130 ------------------------------------------------------------------------- CASH USED IN OPERATING ACTIVITIES (3,501) (3,255) (6,465) (6,525) ------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisition of property, plant and equipment (189) (54) (189) (383) Proceeds from sale of assets - - - 2,744 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (189) (54) (189) 2,361 ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of common shares, net of related costs - 13,787 5,330 15,690 Issue of debenture - - - 500 Proceeds from license and supply agreements - - - 3,250 Repayment of short term loan - - - (1,598) Repayments of long term debt and capital lease obligations (227) (318) (555) (746) ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (227) 13,469 4,775 17,096 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (71) (23) (76) (2) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period (3,988) 10,137 (1,955) 12,930 Cash and cash equivalents, beginning of period 13,246 5,509 11,213 2,716 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 9,258 15,646 9,258 15,646 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid 121 159 164 202 -------------------------------------------------------------------------
Nuvo Research Inc.
CONTACT: Investor Relations: Christina Bessant, Equicom Group Inc., (416)815-0700 x269, cbessant@equicomgroup.com
