MISSISSAUGA, ON, Aug. 14 /PRNewswire-FirstCall/ - Nuvo Research Inc. today announced its financial results and highlights for the second quarter ended June 30, 2006.
Highlights: - Completed analysis of the results from Study 112E, 52 week safety trial, which confirmed the long-term safety profile of Pennsaid(R). - Completed a bought deal financing for gross proceeds of $15 million, which attracted some of the leading U.S. based biotech institutional investors. - Resubmitted the Pennsaid(R) NDA application to the U.S. FDA. The FDA has accepted the resubmission for review and has indicated that its goal date to complete its review of the resubmission is December 28, 2006. - Strengthened management team with the addition of Jim Moulds as Vice President, Finance and Chief Financial Officer. Mr. Moulds brings over 10 years of public company experience. Most recently he was the Senior Vice President, Finance for Tesma International Inc.
“The second quarter of 2006 was one of substantial achievement for Nuvo, the acceptance for review of our Pennsaid(R) NDA resubmission package by the FDA is an important milestone for our company. We look forward to the FDA’s review and conclusion anticipated on December 28, 2006, the action date under the Prescription Drug User Fee Act (PDUFA),” said Dr. Henrich Guntermann, Nuvo’s President and CEO. “In the meantime, we remain in serious discussions with potential U.S. distribution partners.”
Pennsaid(R) is a topical non-steroidal anti-inflammatory (NSAID) used for the treatment of osteoarthritis and is currently approved for sale in Canada and several European countries.
Financial Results:
Operating revenues for the three months ended June 30, 2006 were $1.2 million compared with revenues of $3.1 million for the three months ended May 31, 2005. Revenue for the six month period ended June 30, 2006 was $1.7 million in comparison to $5.3 million for the six month period ended May 31, 2005. The decrease was primarily due to the sale of the Company’s wholly owned subsidiary Dimethaid Health Care Ltd. (“DHCL”) to Paladin Labs Inc. (“Paladin”) in August 2005. DHCL holds the Canadian license for Pennsaid(R) and sells Pennsaid(R) to Canadian wholesalers. So, while Pennsaid(R) shipments to Canadian wholesalers for the three and six months ended June 30, 2006 have increased by 23% and 27% respectively over the three and six months ended May 1, 2005, the Company’s reported sales have declined as the price received for supplying Pennsaid(R) to Paladin is significantly lower than the price previously received selling directly to wholesalers, as is typical in manufacturing arrangements. As a consequence, gross profit declined from $1.6 million to $0.4 million in the quarter and for the six months declined from $2.8 million to $0.7 million. Offsetting a portion of this decline was licensing revenue of $0.1 million in the quarter and $0.2 million during the first six months of the current year which the Company began recognizing after the sale of DHCL.
Total operating expenses for the three month period ended June 30, 2006 declined to $4.3 million compared with expenses of $5.2 million for the three months ended May 31, 2005. Operating expenses for the six month period ended June 30, 2006 declined by $1.5 million to $8.4 million compared with $9.9 million for the six month period ended May 31, 2005. The net decrease in expenses is primarily due to the reductions in Canadian selling and marketing expenses following the sale of DHCL in August 2005.
Included in operating expenses are research and development costs which declined to $2.2 million from $2.4 million for the three month period ended June 30, 2006 versus a year ago. During the current quarter the Company invested in clinical and laboratory studies related to the next generation of Pennsaid(R), completed the resubmission of the NDA for Pennsaid(R) to the FDA (including completion of the analysis relating to Studies 112 and 112E) and continued a Phase II trial of WF10 as a combination therapy for pancreatic cancer. In the comparable period ending May 31, 2005 the Company had substantially completed the enrolment phase for its Phase III efficacy and safety trial (designated ‘Study 112') and the Phase III long-term open-label safety trial (designated ‘Study 112E’) and began to incur significant costs to conduct the trials.
For the six month period ended June 30, 2006, research and development expenses increased to $3.6 million compared with $3.3 million for the six month period ended May 31, 2005. The increase was primarily related to the acquisition of fqubed Inc. in December 2005, a U.S. based research and development laboratory, which allowed the Company to expand its penetration enhancer research. Total expenditures on other research and development activities were consistent between the periods.
Research and development expenditures will vary with the level of activity and are expected to increase throughout fiscal 2006 as a result of plans to expand the Company’s pipeline, including preparations for clinical trials for the next generation of Pennsaid(R), the Company’s onychomycosis drug, Penecure, and the ongoing Phase II trial for WF10 as a combination therapy for pancreatic cancer.
The loss from operations for the three months ended June 30, 2006 was $3.8 million versus $3.7 million in the three months ended May 31, 2005. For the six months the loss increased by $0.4 million to $7.5 million from $7.1 million. The net loss from continuing operations declined significantly to $3.8 million compared with $19.1 million for the three month period ended May 31, 2005 and for the six month period ended June 30, 2006 the net loss was $6.6 million compared with $18.8 million for the six month period ended May 31, 2005. The large loss in the prior year was primarily due to a writedown of intangibles.
During the quarter, the Company raised gross proceeds of $15 million in a bought deal public offering of 37,500,000 Units (the “Units”) at a price of $0.40 per Unit. Each Unit consisted of one common share of Nuvo and one-third of a common share purchase warrant. Each whole warrant entitles the holder to purchase one additional common share of Nuvo at a price of $0.50 for 36 months. The financing provided the Company with net proceeds of $13.7 million and has increased its cash and cash equivalents to $15.6 million at June 30, 2006 compared to $2.7 million at year end.
Detailed financial statements and the MD&A are available at www.nuvoresearch.com or www.sedar.com.
Corporate Development:
In late June 2006, Jim Moulds was appointed Nuvo’s Vice President, Finance and CFO. Mr. Moulds is responsible for overseeing the Company’s overall financial activities and brings over 10 years of public company experience to the executive team. Most recently he was the Senior Vice President, Finance for Tesma International Inc. (“Tesma”), a company listed on the TSX and NASDAQ, until it completed a “going private” transaction in 2005 and earlier had served in various capacities including Corporate Controller, Vice President, Finance and Treasurer. Mr. Moulds played an integral role on the executive management team that took Tesma public in 1995, growing its sales from $344 million to $1.7 billion in 2005 with operations on 4 continents. During Jim’s tenure he performed a key role in several public equity issues, debt financings, acquisitions and strategic planning. Prior to joining Tesma, Mr. Moulds worked in various financial capacities for Magna International Inc. and Ernst & Young LLP. Mr. Moulds received his Chartered Accountant (CA) designation in 1992 and holds a Master of Accounting from the University of Waterloo, where he also earned his undergraduate degree.
Also in June 2006, Nuvo’s former Vice President, Finance and CFO, Grant Britchford was appointed Vice President of Financial Planning. Mr. Britchford’s more than 20 years of senior management experience including his tenure as Nuvo’s CFO over the past two years as the Company restructured and refocused, and four years as Manager, Costs and Budgets with Novopharm, one of Canada’s largest generic drug manufacturers, will prove invaluable in ensuring the optimized allocation of the Company’s financial resources.
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 (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. 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, (thousands of Canadian dollars) 2006 2005 UNAUDITED AUDITED $ $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 15,646 2,716 Accounts receivable 975 612 Inventories 920 823 Prepaid expenses and other 822 569 Current assets of discontinued operations 50 - ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 18,413 4,720 Property, plant and equipment 3,270 3,216 Assets held for sale 389 2,321 ------------------------------------------------------------------------- TOTAL ASSETS 22,072 10,257 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) CURRENT Accounts payable and accrued liabilities 4,456 3,809 Deferred revenue 1,167 879 Short-term loan 621 2,041 Current portion of long-term debt and capital lease obligations 1,207 1,324 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 7,451 8,053 Deferred revenue 6,903 4,465 Long-term debt and capital lease obligations 465 1,035 Debentures 1,847 1,158 ------------------------------------------------------------------------- TOTAL LIABILITIES 16,666 14,711 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY (DEFICIENCY) Capital stock 160,241 145,404 Warrants 10,795 9,720 Contributed surplus 4,523 3,957 Cumulative translation adjustment 114 114 Deficit (170,267) (163,649) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS’ EQUITY (DEFICIENCY) 5,406 (4,454) ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) 22,072 10,257 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT Three-months Six-months UNAUDITED ended ended (thousands of Canadian dollars, June 30, May 31, June 30, May 31, except per share data) 2006 2005 2006 2005 $ $ $ $ ------------------------------------------------------------------------- REVENUE 1,216 3,065 1,705 5,326 Revenue allocation - (947) - (1,595) ------------------------------------------------------------------------- NET REVENUE 1,216 2,118 1,705 3,731 Cost of sales 777 531 1,030 907 ------------------------------------------------------------------------- GROSS PROFIT 439 1,587 675 2,824 LICENSE FEES 144 - 288 - EXPENSES Research and development 2,161 2,361 3,640 3,267 Selling, general and administrative expenses 1,437 1,991 3,152 3,888 Stock-based compensation 311 112 707 599 Amortization of property, plant, and equipment 196 100 373 227 Foreign currency (gain) loss (63) 387 (36) 1,270 Interest and other expense 303 282 607 642 ------------------------------------------------------------------------- 4,345 5,233 8,443 9,893 ------------------------------------------------------------------------- LOSS FROM OPERATIONS (3,762) (3,646) (7,480) (7,069) Gain on sale of former head office - - 947 - Gain on debt settlements - 16 - 4,137 Amortization of intangibles - - - (373) Writedown of assets held for sale (135) - (135) - Writedown of intangibles - (15,488) - (15,488) ------------------------------------------------------------------------- NET LOSS FROM CONTINUING OPERATIONS (3,897) (19,118) (6,668) (18,793) NET EARNINGS FROM DISCONTINUED OPERATIONS 50 35 50 38 ------------------------------------------------------------------------- NET LOSS (3,847) (19,083) (6,618) (18,755) Deficit, beginning of period (166,420) (160,532) (163,649) (159,598) Accretion on acquisition commitments - (1,268) - (2,530) Gain on restructuring acquisition commitments - 22,857 - 22,857 ------------------------------------------------------------------------- DEFICIT, END OF PERIOD (170,267) (158,026) (170,267) (158,026) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NET EARNINGS (LOSS) PER COMMON SHARE (basic and diluted) - continuing operations (0.03) 0.02 (0.05) 0.01 - discontinued operations 0.00 0.00 0.00 0.00 ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three-months Six-months UNAUDITED ended ended (thousands of Canadian dollars) June 30, May 31, June 30, May 31, 2006 2005 2006 2005 ------------------------------------------------------------------------- OPERATING ACTIVITIES - continuing operations $ $ $ $ Net loss for the period (3,897) (19,118) (6,668) (18,793) Adjustment for items not affecting cash: Amortization 196 100 373 600 Deferred revenue recognized (374) - (524) - Stock-based compensation 311 112 707 599 Writedown of assets held for sale 135 - 135 - Writedown of intangibles - 15,488 - 15,488 Accretion of interest on debentures 138 106 269 261 Non-cash foreign exchange loss on acquisition commitments - 383 - 1,181 Gain on debt settlements - (15) - (4,137) Loss (gain) on disposal of property, plant & equipment - 39 (947) 22 Net change in non-cash working capital balances 236 1,115 130 (510) ------------------------------------------------------------------------- CASH USED IN OPERATING ACTIVITIES - continuing operations (3,255) (1,790) (6,525) (5,289) ------------------------------------------------------------------------- INVESTING ACTIVITIES - continuing operations Acquisition of property, plant and equipment (54) (20) (383) (90) Proceeds from disposal of property, plant, and equipment - - 2,744 33 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - continuing operations (54) (20) 2,361 (57) ------------------------------------------------------------------------- FINANCING ACTIVITIES - continuing operations Issuance of common stock and warrants 13,787 (14) 15,690 80 Debentures issued - - 500 - Proceeds from license agreements 3,250 Short-term debt - (16) (1,598) 46 Long-term debt and capital lease obligations (318) (30) (746) (350) ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES - continuing operations 13,469 (60) 17,096 (224) ------------------------------------------------------------------------- Cash flow from discontinued operations - 57 - 40 Effect of foreign currency exchange rate changes on cash and cash equivalents (23) (8) (2) (278) ------------------------------------------------------------------------- Net change in cash and cash equivalents during the period 10,137 (1,821) 12,930 (5,808) Cash and cash equivalents, beginning of period 5,509 5,239 2,716 9,226 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 15,646 3,418 15,646 3,418 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid 159 170 202 473 -------------------------------------------------------------------------
Nuvo Research Inc.
CONTACT: Investor Relations: Christina Bessant, Equicom Group Inc., (416)815-0700 x269, cbessant@equicomgroup.com
