Nuvo Research Announces 2012 First Quarter Results

Nuvo Research Inc. has announced its financial and operational results for the first quarter ended March 31, 2012.

First Quarter and Recent Corporate Developments:
• Pennsaid® U.S. prescriptions continued to grow quarter-over-quarter. U.S. prescriptions grew to 93,000 in the first quarter of 2012, an increase of approximately 98% over the previous quarter due in part to temporary product shortages of Pennsaid's main competitor product, Voltaren® Gel. In April, Pennsaid weekly prescriptions retreated from their first quarter peak which coincides with Voltaren Gel supply resumption;

• Launched the marketing and sale of Synera® to U.S. interventional pain doctors with a dedicated 21 person contract sales force; and

• Galderma S.A. (Galderma) advised that they received a Complete Response Letter from the U.S. Food and Drug Administration (FDA) for the Pliaglis® supplemental New Drug Application (sNDA) outlining additional information the FDA requires before it will approve the sale and marketing of Pliaglis in the U.S. Nuvo has licensed worldwide marketing rights for Pliaglis to Galderma.

"Our strategy of building a profitable specialty pharmaceutical company focused on the treatment of pain continues to progress as evidenced by the commercialization of Synera and growing U.S. Pennsaid sales." said Dan Chicoine, Nuvo's Chairman and Co-Chief Executive Officer.

Chicoine continued, "We expect growth from each of our franchises to add to our revenues in the near future through direct sales, royalty revenue or milestones payments."

Pennsaid U.S.
According to IMS Health, during the first quarter of 2012, U.S. prescriptions of Pennsaid continued to grow quarter-over-quarter to a record of approximately 93,000 with an average 1.35 bottles of Pennsaid dispensed per script. This represents an increase of approximately 98% over the number of prescriptions in the fourth quarter of 2011.

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 March 31, 2012 increased to $6.2 million compared to $3.8 million for the three months ended March 31, 2011.

The significant increase in revenue related to increased royalty and product revenue earned on Pennsaid sales in the U.S., primarily due to the Voltaren Gel temporary product shortage and higher licensee fee revenue.

Gross margin on product sales decreased to $0.7 million for the three months ended March 31, 2012 compared to $1.0 million for the three months ended March 31, 2011. The decrease in gross margin was mainly attributable to a decrease in WF10 sales and a change in the mix of Pennsaid produced and sold by the Company's manufacturing facility.

Total operating expenses for the three months ended March 31, 2012 increased to $6.3 million versus $4.6 million for the three months ended March 31, 2011.

The increase in operating expenses primarily related to higher S&M expenses associated with the Company's launch of Synera in the U.S., targeting interventional pain physicians with a dedicated 21 person pain specialty contract sales force and the inclusion of ZARS' operating expenses.

R&D expenses for the quarter were $1.7 million compared to $2.1 million for the comparable period. R&D expenses decreased by $0.4 million primarily due to the closure of the Company's San Diego research facility at the end of January 2011 and a corresponding reduction in the size of the Company's early stage R&D team.

S&M expenses were $2.0 million for the three months ended March 31, 2012 and $nil for the comparable period in 2011. S&M expenses were entirely attributable to the Company's U.S. launch of Synera.

G&A expenses increased slightly to $2.6 million for the three months ended March 31, 2012 compared to $2.5 million for the three months ended March 31, 2011.

The increase was related to the inclusion of ZARS and an increase in share-based compensation, offset by a decrease in consulting, professional and other fees incurred in completing the ZARS Acquisition.

Net loss was $2.1 million for the three months ended March 31, 2012 compared to $2.4 million for the three months ended March 31, 2011. The decreased loss was a result of higher revenue, partially offset by higher operating expenses.

Cash and cash equivalents were $11.3 million as at March 31, 2012 compared to $14.7 million as at December 31, 2011.

Cash used in operating activities of $3.5 million was $2.4 million higher than the cash used in operating activities of $1.1 million for the three months ended March 31, 2011.

The increase related to an investment in non-cash working capital of $1.4 million in the three months ended March 31, 2012 compared with a recovery of $1.1 million in non-cash working capital in the three months ended March 31, 2011.

The number of common shares outstanding as at March 31, 2012 was 565.7 million.