MISSISSAUGA, ON, May 3 /PRNewswire-FirstCall/ - Nuvo Research Inc. today announced its financial results and highlights for the three-month period ending March 31, 2006.
Highlights: - Completed analysis of Pennsaid(R) phase III Study 112 clinical trial which showed that all primary endpoints were met. - Subsequent to the quarter end, Nuvo completed analysis of the results from Study 112E, 52 week safety trial, which confirmed the long-term safety profile of Pennsaid(R). - The Journal of Rheumatology published Pennsaid(R) data which reaffirmed the efficacy and safety of Pennsaid(R) in the treatment of osteoarthritis. - Raised $3.75 million by selling additional Canadian Pennsaid(R) rights, and issuing a $500,000 debenture to our existing Canadian licensee. - Sold the Markham head office for gross proceeds of $2.9 million and moved to leased premises in Mississauga, Ontario, realizing a gain of $947,000.
“Highlighting the quarter, we received positive results from our Pennsaid(R) Phase III clinical trials, Study 112 and Study 112E, which reconfirmed that Pennsaid(R) is a safe and effective treatment for osteoarthritis and further validates our transdermal drug delivery approach,” said Dr. Henrich Guntermann, Nuvo’s President and CEO. “We now have all required data in hand and are proceeding with our amended New Drug Application, which we anticipate filing with the US FDA in mid-2006.”
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 March 31, 2006 were $489,000 compared with revenues of $2.3 million for the three-months ended February 28, 2005. The decrease was primarily due to the sale of the Company’s Dimethaid Health Care Ltd. (“DHCL”) subsidiary to Paladin Labs Inc. in August 2005. DHCL holds the Canadian license for Pennsaid and sells Pennsaid(R) to Canadian wholesalers. Nuvo no longer records such sales but continues to record Pennsaid(R) sales from its manufacturing plant to DHCL at significantly lower prices typical to manufacturing arrangements.
In the three-month period ended March 31, 2006 gross profit was $236,000 compared with $1.2 million for the three-months ended February 28, 2005. The current period decrease is due to the sale of DHCL and the resulting lower recorded sales of Pennsaid(R) in Canada. The decrease is partially offset by lower Canadian sales and marketing expenses which now are the responsibility of DHCL. Pennsaid shipments to Canadian wholesalers for the twelve-months ended March 31, 2006 have increased by 26% over the twelve-months ended March 31, 2005. During the three-month period ended March 31, 2006, Nuvo recorded $144,000 in license fee revenue, which represents recognition of a portion of the up-front fees received on the sale of DHCL. There was no comparable license fee revenue for the three-months ended February 28, 2005.
Total operating expenses for the three-month period ended March 31, 2006 were $4.1 million compared with expenses of $4.7 million for the three-months ended February 28, 2005.
Research and development expenses were $1.5 million for the three-month period ended March 31, 2006, compared with $906,000 for the three-months ended February 28, 2005. The increased investment in research and development is related to preparation of the Company’s resubmission of Pennsaid(R) to the FDA scheduled for mid 2006, increased penetration enhancer research conducted by fqubed Inc., the San Diego based research facility acquired by the Company in December 2005, and commencement of a Phase II trial of WF10 as a co-therapy for pancreatic cancer.
Research and development expenditures are expected to increase throughout fiscal 2006 as a result of plans to expand the Company’s drug development pipeline. These expenditures will include the cost of preparing for anticipated Phase II trials for Pennsaid Plus and Penecure, and the ongoing Phase II trial for WF10 as a co-therapy for pancreatic cancer.
SG&A costs decreased to $1.7 million for the three-month period ended March 31, 2006, compared to $1.9 million for the three-month period ended February 28, 2005. The net decrease was due to reductions in Canadian selling and marketing expenses following the sale of DHCL in August 2005. The reductions were partially offset by increased costs for salaries, consultants’ fees and travel expenses related to the Company’s Scientific Advisory Board, licensing, business development activities and the expansion of the Company’s intellectual property portfolio. The current quarter also includes preparation and mailing costs for the Company’s December annual report. Due to the change in the Company’s year-end, in the prior year, this cost was incurred in the quarter ended August 31, 2005.
The foreign currency loss for the three-month period ended March 31, 2006 was $27,000 compared with $883,000 for the three-months ended February 28, 2005.
Interest and other expense decreased to $304,000 for the three-month period ended March 31, 2006 compared with $360,000 for the three-months ended February 28, 2005. The current period decrease is primarily due to redemptions of debentures, resulting in lower interest payable, as well as reduced accretion charges.
Amortization charges for the three-month period ended March 31, 2006 was $177,000, compared with $127,000 for the three-months ended February 28, 2005. The net increase of $50,000 was due to $72,000 in new amortization charges related to laboratory facilities acquired through the fqubed Inc. acquisition, partially offset by elimination of amortization of the former head office building that was sold in the quarter.
Net loss for the three-months ended March 31, 2006 was $2.8 million or ($0.02) per share compared with net income of $328,000 or ($0.01) per share for the three-months ended February 28, 2005.
Consolidated cash and cash equivalents amounted to $5.5 million as at March 31, 2006, compared to $2.7 million as at December 31, 2005. Funds used in operating activities were $3.3 million for the three-month period ended March 31, 2006, similar to the $3.5 million of cash used for the comparable period ended February 28, 2005.
The Company continues to pursue sources of financing for its ongoing research and development programs and general corporate purposes.
During the quarter, the Company raised $6.5 million in non-dilutive financing from three sources. First, on January 6, 2006 the Company sold its head office in Markham, Ontario for $2.9M, resulting in net cash proceeds of $1.1M after payment of closing expenses and discharge of the existing mortgage. Second, on January 17, 2006 the Company raised a total of $3.75M by expanding its Pennsaid(R) rights agreement with Squire Pharmaceuticals Inc. (formerly Dimethaid Health Care Ltd.) and issuing a $500,000 three year convertible debenture to Squire. Third, during the quarter, the Company received $1.7 million in cash proceeds from the exercise of outstanding warrants.
Notice of Annual General Meeting
Nuvo will be holding its Annual Meeting of Shareholders on Thursday, May 4, 2006 at the Ontario Heritage Centre, 8 Adelaide Street East, Toronto, Ontario M5C 1J3. The meeting will begin at 9:00 a.m.
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.
CONSOLIDATED BALANCE SHEETS As at As at March December (thousands of CDN dollars) 31, 2006 31, 2005 UNAUDITED AUDITED $ $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 5,509 2,716 Accounts receivable 584 612 Inventories 1,111 823 Prepaid expenses and other 588 569 ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 7,792 4,720 Property, plant and equipment 3,369 3,216 Assets held for sale 524 2,321 ------------------------------------------------------------------------- TOTAL ASSETS 11,685 10,257 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ DEFICIENCY CURRENT Accounts payable and accrued liabilities 3,883 3,809 Deferred revenue 1,241 879 Short-term loan 549 2,041 Current portion of long-term debt 1,261 1,324 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 6,934 8,053 Deferred revenue 7,203 4,465 Long-term debt 684 1,035 Debentures 1,709 1,158 ------------------------------------------------------------------------- TOTAL LIABILITIES 16,530 14,711 ------------------------------------------------------------------------- SHAREHOLDERS’ DEFICIENCY Capital stock 148,626 145,404 Warrants 8,677 9,720 Contributed surplus 4,158 3,957 Cumulative translation adjustment 114 114 Deficit (166,420) (163,649) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS’ DEFICIENCY (4,845) (4,454) ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIENCY 11,685 10,257 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT UNAUDITED THREE-MONTHS ENDED March February (thousands of CDN dollars, except per share data) 31, 2006 28, 2005 $ $ ------------------------------------------------------------------------- REVENUE 489 2,261 Revenue allocation - (648) ------------------------------------------------------------------------- NET REVENUE 489 1,613 Cost of sales 253 376 ------------------------------------------------------------------------- GROSS PROFIT 236 1,237 LICENSE FEES 144 - Research and development 1,479 906 Selling, general and administrative (SG&A) expenses 1,715 1,897 Stock-based compensation 396 487 Amortization of property, plant, and equipment 177 127 Foreign currency loss 27 883 Interest and other expense 304 360 ------------------------------------------------------------------------- 4,098 4,660 ------------------------------------------------------------------------- LOSS FROM OPERATIONS (3,718) (3,423) Gain on sale of former head office 947 - Gain on debt settlements - 4,121 Amortization of intangibles - (373) ------------------------------------------------------------------------- NET INCOME (LOSS) FROM CONTINUING OPERATIONS (2,771) 325 NET INCOME FROM DISCONTINUED OPERATIONS - 3 ------------------------------------------------------------------------- NET INCOME (LOSS) (2,771) 328 Deficit, beginning of period (163,649) (159,598) Accretion on acquisition commitments - (1,261) ------------------------------------------------------------------------- DEFICIT, END OF PERIOD (166,420) (160,531) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NET LOSS PER COMMON SHARE - continuing operations basic and diluted (0.02) (0.01) - discontinued operations basic and diluted (0.00) 0.00 CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED THREE-MONTHS ENDED March February (thousands of CDN dollars) 31, 2006 28, 2005 $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES - continuing operations Net income (loss) for the period (2,771) 325 Adjustment for items not affecting cash: Amortization 177 500 Deferred revenue recognized (144) - Stock-based compensation 396 487 Accretion of interest on debentures 131 155 Non-cash foreign exchange loss on acquisition commitments - 797 Gain on debt settlements - (4,121) Gain on disposal of property, plant & equipment (947) (16) Net change in non-cash working capital balances (104) (1,624) ------------------------------------------------------------------------- CASH USED IN OPERATING ACTIVITIES - continuing operations (3,262) (3,497) ------------------------------------------------------------------------- INVESTING ACTIVITIES - continuing operations Acquisition of property, plant and equipment (329) (70) Proceeds from disposal of property, plant, and equipment 2,744 33 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - continuing operations 2,415 (37) ------------------------------------------------------------------------- FINANCING ACTIVITIES - continuing operations Issuance of common stock 1,903 94 Debentures issued 500 - Proceeds from license agreements 3,250 - Short-term debt (1,598) 62 Long-term debt (430) (320) ------------------------------------------------------------------------- CASH PROVIDED BY FINANCING ACTIVITIES - continuing operations 3,625 (164) ------------------------------------------------------------------------- Cash flow used in discontinued operations - (17) Effect of foreign currency exchange rate changes on cash and cash equivalents 15 (272) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 2,793 (3,987) Cash and cash equivalents, beginning of period 2,716 9,226 ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD 5,509 5,239 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid 43 303 -------------------------------------------------------------------------
Nuvo Research Inc.
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