MISSISSAUGA, ON, Nov. 9 /PRNewswire-FirstCall/ - Nuvo Research Inc. today announced its financial results and highlights for the third quarter ended September 30, 2006.
Highlights: - The U.S. Food and Drug Administration (FDA) confirmed that the resubmission of Nuvo’s New Drug Application (NDA) for Pennsaid(R), a topical non-steroidal anti-inflammatory (NSAID) used for the treatment of osteoarthritis of the knee, had been received. The FDA advised that their Prescription Drug User Fee Act (PDUFA) goal date to complete the review of the resubmission and respond to Nuvo is December 28, 2006; - Continued development of Pennsaid(R) Plus, a follow-on product designed to provide users with the efficacy of existing Pennsaid(R), but with less frequent dosing and increased ease of application. Pennsaid(R) Plus is subject to a patent application and a Pivotal Phase III trial is expected to begin in 2007; and - Strengthened the Scientific Advisory Board with the addition of Jonathan Wilkin, former Director of the FDA’s Dermatology Division.
“Our Pennsaid(R) NDA resubmission to the FDA is in active review with a PDUFA date scheduled for December 28, 2006,” said Dr. Henrich Guntermann, Nuvo’s President and CEO. “We are also pleased with our progress in developing Pennsaid(R) Plus, our proprietary, improved, follow-on product to Pennsaid(R). We expect to commence a Pivotal Phase III trial of Pennsaid(R) Plus in the new year. This line extension strategy enhances our position in ongoing discussions with potential U.S. licensing partners for Pennsaid(R) and Pennsaid(R) Plus.
Financial Results:
Operating revenues for the three months ended September 30, 2006 were $1.0 million compared with revenues of $1.8 million for the three months ended August 31, 2005. Revenue for the nine month period ended September 30, 2006 was $2.7 million in comparison to $7.1 million for the nine month period ended August 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 nine months ended September 30, 2006 have increased by 36% and 30% respectively over the three and nine months ended August 31, 2005, the Company’s reported sales have declined as the price received for supplying Pennsaid(R) to Squire is significantly lower than the price previously received selling directly to wholesalers, as is typical in manufacturing arrangements. As a consequence, gross profit declined to $0.4 million compared with $1.0 million for the three months ended August 31, 2005. Gross profit for the nine month period ended September 30, 2006 was $1.0 million in comparison to $3.8 million for the nine month period ended August 31, 2005. Offsetting a portion of this decline was licensing revenue of $0.3 million in the quarter and $0.5 million for the first nine months of the current year which the Company began recognizing after the sale of DHCL.
Total operating expenses for the three month period ended September 30, 2006 declined to $4.0 million compared with $4.5 million for the three months ended August 31, 2005. Operating expenses for the nine month period ended September 30, 2006 declined to $12.5 million compared with $14.4 million for the nine month period ended August 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 and the absence of a foreign exchange loss in the current period.
Included in operating expenses are research and development costs which were $1.8 million the three month period ended September 30, 2006 compared with $2.2 million for the three months ended August 31, 2005. During the current quarter the Company invested in clinical and laboratory studies related to the next generation of Pennsaid, continued to incur costs relating to the resubmitted NDA for Pennsaid to the U.S. FDA, continued to develop new formulations and bottle designs and continued a Phase II trial of WF10 as an adjuvant therapy for pancreatic cancer. In the comparable period ending August 31, 2005 the Company was incurring costs to conduct 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’).
For both the nine-month period ended September 30, 2006 and the nine-month period ended August 31, 2005, research and development expenses were $5.4 million. Increased costs related to the formulation and enhancer research activities of fqubed Inc., our research facility in the USA, acquired late in 2005, and the establishment and work of the Company’s FDA Advisory Panel were offset by lower costs for clinical trial and laboratory studies due to the absence of significant Phase III trial costs in the current year.
Research and development expenditures will vary with the level of activity and are expected to decrease in the fourth quarter of 2006 as the Company focuses its efforts on activities related to the NDA for Pennsaid as we approach the FDA’s ‘PDUFA’ date of December 28, 2006. R&D costs relating to our plans to expand the Company’s pipeline, including preparations for the Phase III trial for the next generation of Pennsaid, the Company’s onychomycosis drug, Penecure, and the ongoing Phase II trial for WF10 as an adjuvant therapy for pancreatic cancer will not increase significantly until after the PDUFA date.
The loss from operations for the three months ended September 30, 2006 was $3.4 million versus $3.6 million in the three months ended August 31, 2005. For the nine months the loss from operations increased by $0.3 million to $10.9 million from $10.6 million.
The net loss for the three-month period ended September 30, 2006 increased to $3.4 million from $1.6 million in the three-month period ended August 31, 2005. In the prior period the Company recorded a $1.9 million gain on the sale of subsidiary DHCL. For the nine-month period ended September 30, 2006 net loss was reduced to $10.0 million compared with $20.4 million for the nine-month period ended August 31, 2005 primarily due to the prior year writedown of intangibles offset somewhat by the gains on debt settlements and the sale of DHCL.
Detailed financial statements and the MD&A are available at www.nuvoresearch.com or www.sedar.com.
About Pennsaid(R)
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. Pennsaid(R) allows the diclofenac solution to be delivered to a specific site via the surface of the skin and thus avoids 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.
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 September 30, December 31, (thousands of Canadian dollars) 2006 2005 UNAUDITED AUDITED $ $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 11,220 2,716 Accounts receivable 976 612 Inventories 854 823 Prepaid expenses and other 812 569 ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 13,862 4,720 Property, plant and equipment 3,225 3,216 Assets held for sale 389 2,321 ------------------------------------------------------------------------- TOTAL ASSETS 17,476 10,257 ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) CURRENT Accounts payable and accrued liabilities 3,299 3,809 Deferred revenue 1,276 879 Short-term loan 719 2,041 Current portion of long-term debt and capital lease obligations 1,047 1,324 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 6,341 8,053 Deferred revenue 6,619 4,465 Long-term debt and capital lease obligations 293 1,035 Debentures 1,998 1,158 ------------------------------------------------------------------------- TOTAL LIABILITIES 15,251 14,711 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY (DEFICIENCY) Capital stock 160,238 145,404 Warrants 10,795 9,720 Contributed surplus 4,730 3,957 Cumulative translation adjustment 114 114 Deficit (173,652) (163,649) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS’ EQUITY (DEFICIENCY) 2,225 (4,454) ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) 17,476 10,257 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT UNAUDITED (thousands of Three-months Nine-months Canadian dollars, ended ended except per share data) Sept. 30, Aug. 31, Sept. 30, Aug. 31, 2006 2005 2006 2005 $ $ $ $ ------------------------------------------------------------------------- REVENUE 1,000 1,814 2,705 7,140 Revenue allocation - (518) - (2,113) ------------------------------------------------------------------------- NET REVENUE 1,000 1,296 2,705 5,027 Cost of sales 589 315 1,619 1,222 ------------------------------------------------------------------------- GROSS PROFIT 411 981 1,086 3,805 LICENSE FEES 250 - 538 - EXPENSES Research and development 1,768 2,152 5,408 5,419 Selling, general and administrative expenses 1,627 2,002 4,779 5,890 Stock-based compensation 207 113 914 712 Amortization of property, plant and equipment 198 95 571 322 Foreign currency (gain) loss 21 (152) (15) 1,118 Interest and other expense, net 225 328 832 970 ------------------------------------------------------------------------- 4,046 4,538 12,489 14,431 ------------------------------------------------------------------------- LOSS FROM OPERATIONS (3,385) (3,557) (10,865) (10,626) Gain on sale of former head office - - 947 - Writedown of assets held for sale - - (135) - Gain on debt settlements - - - 4,137 Amortization of intangibles - - - (373) Gain on sale of subsidiary - 1,956 - 1,956 Writedown of intangibles - - - (15,488) ------------------------------------------------------------------------- NET LOSS FROM CONTINUING OPERATIONS (3,385) (1,601) (10,053) (20,394) NET EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS - (11) 50 27 ------------------------------------------------------------------------- NET LOSS (3,385) (1,612) (10,003) (20,367) Deficit, beginning of period (170,267) (158,026) (163,649) (159,598) Accretion on acquisition commitments - - - (2,530) Gain on restructuring acquisition commitments - - - 22,857 ------------------------------------------------------------------------- DEFICIT, END OF PERIOD (173,652) (159,638) (173,652) (159,638) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NET EARNINGS (LOSS) PER COMMON SHARE (basic and diluted) - continuing operations (0.02) (0.01) (0.07) (0.00) - discontinued operations 0.00 (0.00) 0.00 0.00 ------------------------------------------------------------------------- NUVO RESEARCH INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three-months Nine-months UNAUDITED ended ended (thousands of Sept. 30, Aug. 31, Sept. 30, Aug. 31 Canadian dollars) 2006 2005 2006 2005 ------------------------------------------------------------------------- OPERATING ACTIVITIES - continuing operations $ $ $ $ Net loss for the period (3,385) (1,601) (10,053) (20,394) Adjustment for items not affecting cash: Amortization 198 95 571 695 Deferred revenue recognized (250) - (774) - Stock-based compensation 207 113 914 712 Accretion of interest on debentures 151 112 420 373 Writedown of assets held for sale - - 135 - Loss (gain) on disposal of property, plant & equipment - - (947) 22 Writedown of intangibles - - - 15,488 Gain on sale of subsidiary (1,956) (1,956) Non-cash foreign exchange loss on acquisition commitments - - - 1,181 Gain on debt settlements - - - (4,137) Net change in non-cash working capital balances (911) (10) (781) (520) ------------------------------------------------------------------------- CASH USED IN OPERATING ACTIVITIES - continuing operations (3,990) (3,247) (10,515) (8,536) ------------------------------------------------------------------------- INVESTING ACTIVITIES - continuing operations Acquisition of property, plant and equipment (152) (10) (535) (100) Proceeds from disposal of property, plant, and equipment (note 5) - 32 2,744 65 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - continuing operations (152) 22 2,209 (35) ------------------------------------------------------------------------- FINANCING ACTIVITIES - continuing operations Issuance of common stock and warrants (3) - 15,687 80 Debentures issued - - 500 - Proceeds from license agreements - 5,500 3,250 5,500 Net proceeds from sale of subsidiary - 1,956 - 1,956 Short-term debt - - (1,598) 46 Long-term debt and capital lease obligations (329) - (1,075) (350) ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES - continuing operations (332) 7,456 16,764 7,232 ------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents (2) (127) (4) (405) ------------------------------------------------------------------------- Net change in cash and cash equivalents from continuing operations (4,476) 4,104 8,454 (1,744) Cash flow from discontinued operations 50 (15) 50 25 ------------------------------------------------------------------------- Net change in cash and cash equivalents during the period (4,426) 4,089 8,504 (1,719) Cash and cash equivalents, beginning of period 15,646 3,418 2,716 9,226 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 11,220 7,507 11,220 7,507 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid 59 85 261 558 -------------------------------------------------------------------------
Nuvo Research Inc.
CONTACT: Investor Relations: Christina Bessant, Equicom Group Inc., (416)815-0700 x269, cbessant@equicomgroup.com
