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Nuvo Research Announces 2012 Second Quarter Results

Published: Tuesday, August 07, 2012
Last Updated: Tuesday, August 07, 2012
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Company receives notice of a positive opinion for the approval of Pliaglis.

Nuvo Research Inc. has announced its financial and operational results for the second quarter ended June 30, 2012.

Second Quarter and Recent Corporate Developments:
• The Company received notice of a positive opinion from the European Decentralized Procedure for the approval of Pliaglis® in the E.U. from the German Federal Institute for Drugs and Medical Devices (BfArM), the reference member state;
• The Company was advised by Galderma S.A. (Galderma) that it received marketing licenses for Pliaglis in 5 E.U. countries; the first 3 licenses entitled Nuvo to receive US$6.0 million of milestone payments;
• Galderma submitted a response to the Complete Response Letter from the U.S. Food and Drug Administration (FDA) and has advised Nuvo that it believes the response addresses all of the FDA's issues required for the approval of the supplemental New Drug Application (sNDA) for Pliaglis in the U.S.;
• The Company was advised by Mallinckrodt Inc. (Mallinckrodt), the Pharmaceuticals business of Covidien, that an sNDA for Pennsaid® 2% filed with the U.S. FDA by Mallinckrodt was converted by Mallinckrodt to a New Drug Application (NDA), as per the FDA's request, and was accepted by the FDA for review with a Prescription Drug User Fee Act (PDUFA) date of March 4, 2013;
• The United States Patent Office issued a patent relating to a method of using Pennsaid with an expiry date of July 10, 2029 which was filed in the FDA Orange Book;
• The Company and Mallinckrodt received Paragraph IV certification notices from three companies advising that they have filed an Abbreviated New Drug Application (ANDA) with the FDA for a generic version of Pennsaid;
• The United States Patent Office reinstated a patent related to Synera® Patch with an expiry date of July 7, 2020 which was filed in the FDA Orange Book;
• The Development Bank of Saxony (SAB) in Germany advised Nuvo that it will provide Nuvo with up to €4.4 million of non-repayable funding for the further development of its improved reformulated version of WF10;
• The Company entered into a license and supply agreement granting Paladin Labs, Inc. (Paladin) exclusive Canadian rights to market and sell Synera, upon regulatory approval; and
• The Company signed a loan agreement with Paladin; whereby, Paladin has agreed to loan Nuvo $8.0 million in two equal tranches of $4.0 million. The first tranche was advanced in late May 2012.

"2012 has been a very busy and productive time for Nuvo," said Dan Chicoine, Nuvo's Chairman and Co-Chief Executive Officer. "We continue to move forward with our strategy of building a profitable specialty pharmaceutical company focused on the treatment of pain."

Pennsaid U.S.
According to IMS Health, during the second quarter of 2012, U.S. prescriptions of Pennsaid continued to grow quarter-over-quarter to a record of approximately 95,000 with an average 1.31 bottles of Pennsaid dispensed per script. This represents an increase of approximately 2% over the number of prescriptions in the first quarter of 2012.

In the first quarter of 2012, Endo Pharmaceuticals Holdings Inc. (Endo) indicated that there would be temporary shortages in the U.S. of its licensed product, Voltaren Gel, the main competitor product to Pennsaid, as a result of manufacturing issues unrelated to Voltaren Gel at a facility owned by Novartis Consumer Health that was supplying Voltaren Gel for the U.S. market.

Such product shortages have contributed to recent substantial increases in Pennsaid U.S. prescriptions; however, in April, Pennsaid weekly prescriptions retreated from their first quarter peak which coincides with Voltaren Gel supply resumption.

Operating Results
Revenue, consisting of product sales, royalties, license fee revenue and research and other contract revenue for the three months ended June 30, 2012 increased to $11.4 million compared to $3.8 million for the three months ended June 30, 2011.

The significant increase in revenue relates to $5.1 million in milestone payments earned by the Company upon the marketing approval of Pliaglis in the first two European countries and an increase in royalty and product revenue earned on Pennsaid sales in the U.S., primarily due to the Voltaren Gel temporary product shortage.

Total revenue for the six months ended June 30, 2012 was $17.6 million compared to $7.6 million for the six months ended June 30, 2011.

For the three months ended June 30, 2012, gross margin on product sales increased to $0.8 million compared to $0.5 million for the three months ended June 30, 2011. The increase in gross margin was primarily attributable to an increase in Pennsaid product sales.

For the six months ended June 30, 2012, gross margin on product sales were $1.6 million compared to $1.5 million for the six months ended June 30, 2011.

Total operating expenses for the three and six months ended June 30, 2012 were $5.6 million and $11.9 million compared to $4.6 million and $9.2 million for the three and six months ended June 30, 2011. The increase in operating expenses relates primarily to sales and marketing (S&M) costs for the Company's launch of Synera in the United States, targeting interventional pain physicians with a dedicated 21 person pain specialty contract sales force and the inclusion of ZARS' operating expenses.

R&D expenses were unchanged at $2.0 million for the three months ended June 30, 2012 and the three months ended June 30, 2011. R&D expenses for the six months ended June 30, 2012 were $3.7 million compared to $4.1 million for the six months ended June 30, 2011. The decrease in R&D expenses year-over-year was attributable to the closure of the Company's San Diego research facility at the end of January 2011.

S&M expenses were $1.4 million and $3.4 million for the three and six months ended June 30, 2012 compared to $nil for the three and six months ended June 30, 2011. S&M expenses were entirely attributable to the U.S. launch of Synera.

G&A expenses were $2.2 million for the three months ended June 30, 2012 compared to $2.6 million for the three months ended June 30, 2011. The decrease is related to consulting, professional and other fees incurred in the comparative period related to the ZARS acquisition. G&A expenses decreased to $4.8 million for the six months ended June 30, 2012 compared to $5.2 million for the six months ended June 30, 2011.

Net income was $3.3 million and $1.2 million for the three and six months ended June 30, 2012 compared to a net loss of $0.6 million and $2.9 million for the three and six months ended June 30, 2011.

The increase in income was attributable to the milestone revenue earned from Galderma and higher royalty revenue on Pennsaid sales in the U.S. partially offset by higher operating expenses. In addition, the comparable period included a $1.8 million gain recognized on the change in terms of the contingent consideration related to the ZARS acquisition.

Cash and cash equivalents were $14.1 million as at June 30, 2012 compared to $14.7 million as at December 31, 2011.

Cash used in operating activities was $1.0 million for the three months ended June 30, 2012 compared to $4.3 million for the three months ended June 30, 2011. The decrease related to a larger investment in non-cash working capital in the current quarter compared to the comparative period. For the six months ended June 30, 2012, cash used in operating activities was $4.4 million for the six months ended June 30, 2012 versus $5.4 million for the six months ended June 30, 2011.

Cash provided by financing activities was $3.8 million and $3.9 million for the three and six months ended June 30, 2012 compared to cash used in financing activities of $3.0 million for both for the three and six months ended June 30, 2011. In the quarter, the Company received loan proceeds of $4.0 million from Paladin which represents the first tranche of a $8.0 million loan. In the comparative period, the Company paid the entire balance of acquired bank debt from the ZARS acquisition that was payable on the acquisition date.

The number of common shares outstanding as at June 30, 2012 was 565.7 million.


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