MISSISSAUGA, ON, Oct. 28 /CNW/ -- Nuvo Research Inc. (TSX: NRI), 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 and on the research and development of its immune modulating drug candidate, WF10, today announced its financial and operational results for the quarter ended September 30, 2009.
Reent Corporate Developments:
- Received funding commitments from the Development Bank of Saxony in
Germany for two co-operative drug development projects with the
Fraunhofer Institute in Leipzig, Germany. These two projects will
focus on the preclinical and clinical development of WF10 as
potential treatments for allergic rhinitis and rheumatoid arthritis;
- Announced that the U.S. Food and Drug Administration (FDA) set a new
action date of November 4, 2009 under the Prescription Drug User Fee
Act (PDUFA) for the FDA's response to the Company's application for
U.S. marketing approval of Pennsaid, the Company's topical diclofenac
product for the treatment of the signs and symptoms of knee
osteoarthritis; and,
- As at September 30, 2009, had $29.5 million in cash and cash
equivalents, that included $6.1 million in proceeds from warrants
exercised in July 2009.
"We remain optimistic that the FDA will approve Pennsaid for marketing in the U.S.," said Henrich Guntermann, President and Chief Executive Officer of Nuvo Research. "In addition, our early stage pipeline of topical pain products, the emergence of WF10 as a potential treatment for allergic rhinitis and rheumatoid arthritis, and our strong cash position put Nuvo on a path to achieving our goal of becoming a diversified, well capitalized, profitable drug development company."
Financial Results:
(thousands of Canadian dollars)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
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Revenue $ 3,234 $ 3,289 $ 8,987 $ 7,610
Net loss $ (2,725) $ (3,004) $ (7,257) $ (8,139)
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Revenue, consisting of product sales, license fee revenue, and research and other contract revenue, for the three months ended September 30, 2009 decreased slightly to $3.2 million compared with $3.3 million for the three months ended September 30, 2008. In the current period, a significant increase in product sales was offset by lower license fees as the comparable quarter included a non-recurring $0.9 million payment from our Canadian licensee to settle past obligations under their original Pennsaid(R) licensing agreements. Revenue for the nine months ended September 30, 2009 increased 18% to $9.0 million compared to $7.6 million for the nine months ended September 30, 2008. This increase is primarily attributable to a $1.5 million increase in Pennsaid product sales to our Canadian licensee and Greek distributor.
For the three months ended September 30, 2009, gross margin on product sales increased to $1.0 million compared to $0.5 million for the three months ended September 30, 2008. The increase in gross margin is almost entirely attributable to the increase in sales of Pennsaid. For the nine months ended September 30, 2009, gross margin on product sales was $2.9 million compared to $2.2 million for the nine months ended September 30, 2008. The increase in gross margin is primarily attributable to higher Pennsaid sales, offset partially by higher material costs, the strengthening U.S. dollar and costs related to the capacity expansion at the Company's manufacturing facility.
Total operating expenses, excluding foreign currency losses, for the three months ended September 30, 2009 were $3.9 million, a decrease of 13% from $4.5 million for the three months ended September 30, 2008. The decrease in the quarter relates primarily to lower research and development expenses offset partially by increases in selling, general and administrative expenses. Total operating expenses, excluding foreign currency losses, for the nine months ended September 30, 2009 decreased to $11.8 million compared to $12.1 million for the nine months ended September 30, 2008. The decrease from 2008 relates to lower research and development expenses, stock-based compensation and amortization expense, partially offset by higher SG&A costs.
Research and development expenses were $1.8 million and $5.6 million for the three and nine months ended September 30, 2009, decreases of 29% and 18%, compared with $2.6 million and $6.8 million for the three and nine months ended September 30, 2008, respectively. The decrease in the three and nine-month periods relates to reduced spending on Pennsaid, as all studies necessary for filing the Company's Complete Response to the Pennsaid Approvable Letter were completed prior to filing in early 2009. In addition, under the terms of the U.S. Licensing Agreement, Covidien assumed responsibility for all Pennsaid and Pennsaid Plus development activities and costs subsequent to June 15, 2009. These declines were partially offset by severance costs and increased spending on research and formulation development activities at the Company's research labs in San Diego in the nine month period.
SG&A expenses increased to $1.6 million and $4.8 million for the three and nine months ended September 30, 2009, compared to $1.3 million and $3.6 million for the three and nine months ended September 30, 2008. The increase in the quarter is primarily attributable to executive management bonuses. For the nine months, the increase in SG&A is primarily attributable to costs relating to the U.S. Licensing Agreement, bonus payments and compensation expense incurred upon revaluation of the outstanding units in the Company's DSU Plan to their market value.
Net loss declined to $2.7 million for the three months ended September 30, 2009 compared to $3.0 million for the three months ended September 30, 2008 as the comparative period included a $0.3 million loss on the extinguishment of the convertible debentures. For the nine months ended September 30, 2009, the net loss declined to $7.3 million from $8.1 million compared to the nine months ended September 30, 2008.
Cash and cash equivalents were $29.5 million as at September 30, 2009, a substantial increase compared to $15.2 million as at December 31, 2008, primarily as a result of the $11.3 million Upfront Payment received from Covidien and $11.6 million in proceeds received upon the exercise of warrants.
Cash used in operations was $2.2 million for both the three months ended September 30, 2009 and 2008. Although the net loss in the 2009 quarter was lower, the improvement was entirely attributable to a non-cash charge related to the extinguishment of the convertible debentures such that cash used in operations was unchanged. For the nine-month period, cash used in operations decreased only slightly to $7.0 million compared to $7.1 million for the nine-months ended September 30, 2008.
Net cash used in investing activities totaled $130,000 and $333,000 for the three and nine months ended September 30, 2009 compared to $36,000 and $92,000 in the three and nine months ended September 30, 2008. The spending in 2009 was primarily for the purchase of new production equipment in preparation for the anticipated launch of Pennsaid in the U.S.
Net cash provided by financing activities totaled $6.1 million and $11.4 million for the three and nine months ended September 30, 2009, compared to $1.4 million and $2.3 million for the three and nine months ended September 30, 2008. During 2009 all cash provided by financing activities was attributable to the exercise of warrants.
Detailed financial statements and the MD&A are available at www.nuvoresearch.com or www.sedar.com.
About Pennsaid
Pennsaid, the Company's lead product, is used to treat the pain and symptoms associated with knee osteoarthritis. Pennsaid combines a transdermal carrier (containing dimethyl sulfoxide, popularly known as "DMSO") with diclofenac sodium, a leading non-steroidal anti-inflammatory drug ("NSAID"), and delivers the active drug through the skin directly to the site of pain. While, conventional oral NSAIDs expose patients to potentially serious systemic side effects such as gastrointestinal bleeding and cardiovascular risks, Nuvo's clinical trials suggest that some of these systemic side effects occur less frequently with topically applied Pennsaid. There are more than 27 million Americans suffering from osteoarthritis 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 and WF10, its immune modulating drug candidate. Nuvo's lead product is Pennsaid, a topical NSAID used for the treatment of osteoarthritis of the knee. Nuvo intends to leverage its skin-penetrating technologies to create a portfolio of topical and transdermal products targeting a variety of indications.
Nuvo is a publicly traded, Canadian pharmaceutical company headquartered in Mississauga, Ontario, with manufacturing facilities in Varennes, Québec 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, 2008. 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:
NUVO RESEARCH INC.
CONSOLIDATED BALANCE SHEETS
As at As at
September 30, December 31,
2009 2008
Unaudited Audited
(thousands of Canadian dollars) $ $
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ASSETS
CURRENT
Cash and cash equivalents 29,489 15,219
Accounts receivable 2,959 2,294
Inventories 1,768 1,393
Prepaid expenses and other 309 446
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TOTAL CURRENT ASSETS 34,525 19,352
Restricted cash 71 93
Property, plant and equipment 1,842 1,990
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TOTAL ASSETS 36,438 21,435
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 3,136 2,736
Deferred revenue 2,241 2,241
Current portion of long-term debt and capital
lease obligations 150 181
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TOTAL CURRENT LIABILITIES 5,527 5,158
Deferred revenue 12,982 3,321
Long-term debt and capital lease obligations 158 320
Debentures 2,912 4,774
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TOTAL LIABILITIES 21,579 13,573
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SHAREHOLDERS' EQUITY
Common shares 209,845 189,603
Warrants 4,652 10,847
Contributed surplus 7,801 6,890
Accumulated other comprehensive income 114 114
Deficit (207,553) (199,592)
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TOTAL SHAREHOLDERS' EQUITY 14,859 7,862
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 36,438 21,435
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NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Three months Nine months
Unaudited ended ended
(thousands of Canadian September September September September
dollars except per share 30, 2009 30, 2008 30, 2009 30, 2008
and share amounts) $ $ $ $
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REVENUE
Product sales 2,567 1,808 7,025 5,578
Cost of goods sold 1,555 1,281 4,138 3,366
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Gross margin on product sales 1,012 527 2,887 2,212
Other revenue
Licensing fees 560 1,453 1,680 1,953
Research and other contract revenue 107 28 282 79
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1,679 2,008 4,849 4,244
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EXPENSES
Research and development 1,810 2,556 5,586 6,793
Selling, general and administrative
expenses 1,638 1,278 4,792 3,564
Stock-based compensation 131 131 395 497
Amortization of property, plant,
and equipment and intangibles 153 221 450 633
Foreign currency loss 525 255 306 12
Interest expense 169 418 642 1,046
Interest income (22) (146) (65) (461)
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4,404 4,713 12,106 12,084
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Loss from operations (2,725) (2,705) (7,257) (7,840)
Loss on extinguishment of
convertible debenture - (299) - (299)
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Net Loss and total comprehensive
loss (2,725) (3,004) (7,257) (8,139)
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Net loss per common share - basic
and diluted (0.01) (0.01) (0.02) (0.03)
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Average number of common shares
outstanding - basic and diluted
(millions) 388.8 310.1 353.9 304.2
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NUVO RESEARCH INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Nine months
ended ended
Unaudited September September September September
(thousands of Canadian 30, 2009 30, 2008 30, 2009 30, 2008
dollars $ $ $ $
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OPERATING ACTIVITIES
Net loss (2,725) (3,004) (7,257) (8,139)
Items not involving current cash
flows:
Amortization 153 221 450 633
Deferred revenue recognized (560) (560) (1,680) (1,271)
Stock-based compensation and
payments 131 131 395 497
Deferred stock unit expense 12 - 251 -
Accretion of interest on
debentures 117 295 412 729
Loss on extinguishment of
convertible debenture - 299 - 299
Other 721 408 464 147
Net change in non-cash working
capital (422) 1,400 (998) 1,058
Proceeds from licensing
arrangements and advances on
research contracts - 1,093 11,341 1,093
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CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (2,573) 283 3,378 (4,954)
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INVESTING ACTIVITIES
Acquisition of property, plant
and equipment (130) (36) (333) (120)
Proceeds from sale of assets - - - 28
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CASH USED IN INVESTING ACTIVITIES (130) (36) (333) (92)
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FINANCING ACTIVITIES
Issuance of common shares and
warrants, net of related costs 6,142 (1) 11,584 946
Issuance of debentures, net of
related costs - 1,932 - 1,932
Repayments of long-term debt and
capital lease obligations (45) (548) (139) (608)
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CASH PROVIDED BY FINANCING
ACTIVITIES 6,097 1,383 11,445 2,270
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Effect of exchange rate changes
on cash and cash equivalents (165) (76) (220) (113)
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Net change in cash and cash
equivalents during the period 3,229 1,554 14,270 (2,889)
Cash and cash equivalents,
beginning of period 26,260 17,348 15,219 21,791
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CASH AND CASH EQUIVALENTS, END
OF PERIOD 29,489 18,902 29,489 18,902
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Interest paid 10 6 271 160
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%SEDAR: 00002418E