Nuvo announces 2007 fourth quarter and year end financial results



    MISSISSAUGA, ON, Feb. 21 /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, today announced its financial and
operational results for the year and the fourth quarter ended December 31,
2007.

    
    Key Corporate Developments:

    -   Made substantial progress regarding studies necessary for the
        Complete Response to the approvable letter for Pennsaid(R), a topical
        non-steroidal anti-inflammatory drug (NSAID) used to treat the pain
        and stiffness associated with knee osteoarthritis;

    -   Significantly strengthened the Company's scientific team with the
        appointment of Dr. Bradley Galer as Vice President, Pain Products;

    -   Continued the successful launch of Pennsaid(R) in Greece; and,

    -   Focused corporate resources towards the development of the topical
        and transdermal drug candidate pipeline.
    

    "We are making good progress towards our Complete Response to the FDA for
Pennsaid," stated Dan Chicoine, Nuvo's Chairman. "All studies that will
provide the information to support our Complete Response are on track to be
completed by the end of this year, so that we can resubmit our application for
Pennsaid FDA approval in early 2009. We continue to strengthen our management
and scientific teams and our drug candidate pipeline, which, while at an early
stage, looks very promising."

    Pennsaid's U.S. Regulatory Approval Process:

    Nuvo received an approvable letter (the "Approvable Letter") from the FDA
for Pennsaid(R) on December 28, 2006 which indicated that Pennsaid(R) is
approvable subject to Nuvo satisfying certain conditions. None of the
conditions in the Approvable Letter relate to the clinical efficacy or the
clinical safety of Pennsaid(R), which were evidenced in Nuvo's Phase III
trials. The FDA has not requested that Nuvo conduct any additional Phase III
clinical trials as a condition of approval. The conditions require that Nuvo
provide additional information in three areas: 1) Bottling and packaging, 2)
Safety of Pennsaid in every day use, and 3) Non-clinical dermal safety.
    Nuvo has made substantial progress toward satisfying these conditions and
expects to complete a majority of the studies that will generate information
to support its Complete Response by the end of this summer. The longest-term
study that is being completed prior to submission of the Complete Response,
which is a 12 month dermal animal safety study, is underway and will be
completed by the end of 2008. Nuvo and the FDA have agreed that an additional
long-term dermal animal study may be completed post approval provided that no
safety concerns have arisen from the other safety studies. Nuvo believes it
will be in a position to resubmit its Pennsaid application to the FDA in early
2009 and that the FDA will respond six months thereafter.

    Other Development Programs

    In order to achieve the Company's "vision" of being a leader in the
research and development of drug products delivered to and through the skin,
in the second half of 2007, the Company reevaluated its allocation of
corporate resources. Through this difficult process, the Company made the
decision to focus additional resources on research and early to mid-stage drug
development and fewer resources on late-stage drug development, administration
and regulatory affairs. The Company reduced its overall headcount including
administrative and regulatory staff, but added key personnel to its management
and scientific teams including the promotion of Dominic King-Smith to the role
of Vice President, New Product Planning and recruitment of Dr. Bradley Galer
into the position of Vice President, Pain Products. The Company continues to
build its scientific team at its research and development facility in San
Diego.
    This reallocation of resources allows Nuvo to focus on the development of
new drug candidates utilizing its topical and transdermal drug delivery
technologies and development expertise. Nuvo's focus is primarily on the
treatment of pain, particularly in cases where changing the dosage form of
proven active drugs from oral to topical provides the possibility of clinical
benefit, with reduced systemic exposure and fewer systemic side effects.
Nuvo's technologies are also well suited to the treatment of many
dermatological conditions. Nuvo personnel are active in several areas where
its technologies and expertise have potential application including: acute
inflammatory and acute and chronic neuropathic pain, onychomycosis, and other
dermatological areas.
    "For 2008, the Company's focus will be on three critical areas," stated
Henrich Guntermann, Nuvo's President and CEO. "They are the completion of the
studies necessary for the Complete Response to the Pennsaid Approvable Letter;
signing a licensing agreement for Pennsaid in the U.S. market; and,
meaningfully expanding the drug candidate pipeline while at the same time
effectively managing our cash resources."

    
    Financial Results:
    (thousands of Canadian dollars)

                      Three months  Three months
                             ended         ended    Year ended    Year ended
                       December 31,  December 31,  December 31,  December 31,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue              $   2,207     $   1,005     $   7,178     $   4,248
    Loss from continuing
     operations             (3,332)       (3,142)      (12,376)      (13,195)
    Net loss             $  (3,332)    $  (3,012)    $ (12,376)    $ (13,015)
    -------------------------------------------------------------------------
    

    Revenue for the three-months ended December 31, 2007 increased 120% to
$2.2 million compared with $1.0 million for the three-months ended
December 31, 2006. The increase was entirely attributable to $1.3 million in
Pennsaid product sales to the Company's Greek distributor which launched the
product earlier this year. An increase in Canadian Pennsaid product sales
versus a year ago was entirely offset by a decline in Italian Pennsaid sales.
Revenue from other sources was similar in both periods. For the year, revenue
increased 69% to $7.2 million versus $4.2 million as sales of Pennsaid
increased twofold to $5.1 million from $2.5 million. The increase in Pennsaid
product sales for the year is primarily attributable to the launch of Pennsaid
in Greece during the second quarter of 2007.
    Total operating expenses for the three-month period ended December 31,
2007 increased to $4.3 million versus $3.5 million for the three-months ended
December 31, 2006. The increase in expenses is primarily due to higher
research and development expenses and $0.4 million of severance costs offset
by lower selling, general and administrative expenses in the fourth quarter of
2007 due to reductions in corporate headcount in October and the closure of
the international marketing office at the end of the third quarter. Total
operating expenses for year ended December 31, 2007 were $15.7 million, an
increase of 5% compared to $14.9 million for the year ended December 31, 2006.
The increase from 2006 relates to higher research and development spending as
the Company commenced the majority of the studies to address the conditions
raised in the Approvable Letter of December 28, 2006.
    Included in operating expenses are research and development costs which
were $2.1 million for the three-month period ended December 31, 2007 compared
to $1.2 million for the three-months ended December 31, 2006. In the period
ending December 31, 2007 the Company incurred approximately $1.0 million in
external costs related to completing studies and work for its Complete
Response to the Approvable Letter versus the fourth quarter of 2006 when the
Company was using primarily internal staff to prepare for the expected
Pennsaid Plus phase III clinical trial. Research and development expenses were
$8.3 million for the year ended December 31, 2007, an increase of 24% compared
to $6.7 million for the year ended December 31, 2006. The majority of spending
for the year related to work and studies to address the conditions raised in
the Approvable Letter.
    The loss from continuing operations for the three-months ended
December 31, 2007 was $3.3 million versus $3.1 million for the three-months
ended December 31, 2006. The increase is due to higher research and
development expenses and severance costs as discussed above, more than
offsetting the increase in gross margin attributable to higher revenue from
Pennsaid product sales. During the fourth quarter of 2006, the Company
recorded $0.1 million of income from discontinued operations. As a result, the
net loss for the three-months ended December 31, 2007 was $3.3 million
compared with $3.0 million for the comparable period in 2006. For the year
ended December 31, 2007, net loss was $12.4 million, a decrease over the $13.0
million for the year ended December 31, 2006. The smaller net loss is
attributable to a $1.2 million reduction in the loss from operations for 2007,
reduced by lower gains on asset sales and no income from discontinued
operations in 2007.
    Cash and cash equivalents on hand at December 31, 2007 of $21.8 million
were $2.7 million less than the $24.5 million at September 30, 2007. The
decrease is almost entirely attributable to cash used by operating activities.
At December 31, 2006 cash and cash equivalents were $11.2 million.
    Cash used in operating activities of $2.7 million was lower than the
$3.4 million used in the three-month period ended December 31, 2006 due a
large investment in non-cash working capital in the fourth quarter of 2006.
This investment was necessary as inventory levels increased in preparation for
shipments in the new year including initial sales to Greece while accounts
payable and accruals decreased. In the fourth quarter of 2007, the investment
in non-cash working capital was smaller as the Company received the final
payment relating to the sale of property in Varennes. For the year cash used
in operating activities decreased by 11% to $12.3 million versus $13.9 million
in 2006. The decrease is primarily due a significant decrease in cash invested
in non-cash working capital in 2007 compared to 2006.
    In the fourth quarter of 2007 the Company did not generate any cash from
financing activities but during the fourth quarter of 2006, the Company
generated $3.2 million in net cash that included: $2.9 million from the
exercise of warrants and stock options and employee contributions under the
Stock Purchase Plan; $500,000 in proceeds on the issuance of the debenture to
Paladin; and, $250,000 as an upfront licensing payment for Pennsaid Plus in
Canada; offset by, $417,000 in long-term and capital lease repayments. Amounts
in the current period were insignificant. For the year net cash provided by
financing activities totaled $23.2 million compared with $20.0 million for the
year ended December 31, 2006. In 2007, the majority of the cash provided by
financing activities was raised through the issuance of common shares and
warrants via the July 13, 2007 bought deal equity financing and the proceeds
from the exercise of 13.1 million warrants under the warrant incentive
program.
    Detailed financial statements and the MD&A are available at
www.nuvoresearch.com or www.sedar.com.

    Notice of Annual General Meeting

    Nuvo will be holding its Annual Meeting of Shareholders on Thursday,
May 1, 2008 at 9:00 a.m. (EST) at the Gallery of the Toronto Stock Exchange
(TSX) Broadcast & Conference Centre, The Exchange Tower, 130 King Street West,
Toronto, Ontario, Canada.

    About Pennsaid

    Pennsaid(R) is a topical non-steroidal anti-inflammatory drug (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 limits 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 are more than 21 million Americans suffering from osteoarthritis, a very
painful and debilitating condition, and the United States market for this
condition is estimated at US$4 billion annually. In December 2006, the U.S.
Food and Drug Administration issued an approvable letter that indicated
Pennsaid(R) is approvable subject to Nuvo satisfying certain conditions.

    About Nuvo Research Inc.

    Nuvo is a Canadian drug development company primarily focused on the
research and development of drug products that are delivered to and through
the skin. Nuvo is also involved in research and development activities
involving WF10, a chlorite-based, immunomodulating drug through its 60%
interest in Dimethaid AG.
    Nuvo believes it is uniquely positioned to research and develop new drug
product candidates for delivery to and through the skin using its multiplexed
molecular penetration enhancers ("MMPE(TM)"s), that interact with the skin and
enhance its permeability thereby allowing certain drug molecules to pass into
and through the skin to proximate tissues and its high throughput
experimentation systems that allow its scientists to rapidly screen
combinations of existing molecular penetration enhancers ("MPE(TM)s") with
large numbers of potential drug formulations to measure their ability to
permeabilize and permeate the skin. Nuvo's lead product Pennsaid(R), a topical
non-steroidal anti-inflammatory drug (NSAID) utilizes the Company's technology
to treat the symptoms of osteoarthritis of the knee locally. Nuvo intends to
leverage its technologies to create a portfolio of topical and transdermal
products targeting a variety of indications. Nuvo Research Inc. is a publicly
traded company headquartered in Mississauga, Ontario, with manufacturing
facilities in Varennes, Québec and Wanzleben, Germany and a research and
development facility in San Diego, California. 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:

    
                         CONSOLIDATED BALANCE SHEETS

                                                         As at         As at
                                                   December 31,  December 31,
    (thousands of Canadian dollars)                       2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    CURRENT
    Cash and cash equivalents                           21,791        11,213
    Accounts receivable                                  1,802           968
    Other receivable                                       579           375
    Inventories                                          1,042         1,051
    Prepaid expenses and other                             789           892
    -------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                                26,003        14,499

    Restricted cash                                         79             -
    Property, plant and equipment                        2,475         3,120
    Intangible assets                                       90             -
    -------------------------------------------------------------------------
    TOTAL ASSETS                                        28,647        17,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT
    Accounts payable and accrued liabilities             2,994         3,008
    Short term loan                                        587           557
    Deferred revenue                                     1,211         1,352
    Current portion of long term debt and
     capital lease obligations                              94           677
    Current portion of debentures                          500             -
    -------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                            5,386         5,594
    Deferred revenue                                     5,169         6,552
    Long term debt and capital lease obligations           222           337
    Debentures                                           2,006         1,999
    -------------------------------------------------------------------------
    TOTAL LIABILITIES                                   12,783        14,482
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Common shares                                      187,877       165,400
    Warrants                                            11,243         9,402
    Contributed surplus                                  5,670         4,885
    Accumulated other comprehensive income                 114           114
    Deficit                                           (189,040)     (176,664)
    -------------------------------------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                          15,864         3,137
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          28,647        17,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



       CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT

                                                    Year ended    Year ended
                                                   December 31,  December 31,
    (thousands of Canadian dollars                        2007          2006
     except per share amounts)                               $             $
    -------------------------------------------------------------------------
    REVENUE
    Product sales                                        5,933         3,281
    Cost of goods sold                                   4,391         3,411
    -------------------------------------------------------------------------
    Gross margin (loss) on product sales                 1,542          (130)

    Other revenue
    Licensing fees                                       1,000           789
    Research and other contract revenue                    245           178
    -------------------------------------------------------------------------
                                                         2,787           837
    EXPENSES
    Research and development                             8,319         6,685
    Selling, general and administrative expenses         5,498         5,349
    Stock-based compensation                               808         1,235
    Amortization of property, plant, and equipment
     and intangibles                                       869           786
    Foreign currency (gain) loss                          (118)           89
    Interest expense                                     1,102         1,114
    Interest income                                       (779)         (328)
    -------------------------------------------------------------------------
                                                        15,699        14,930
    -------------------------------------------------------------------------
    Loss from operations                               (12,912)      (14,093)
    Gain on sale of assets                                 536           947
    Impairment charge                                        -          (135)
    Restructuring cost recovery                              -            86
    -------------------------------------------------------------------------
    Loss from continuing operations                    (12,376)      (13,195)
    Net Income from discontinued operations                  -           180
    -------------------------------------------------------------------------
    NET LOSS FOR THE YEAR AND TOTAL
     COMPREHENSIVE LOSS                                (12,376)      (13,015)

    Deficit, beginning of year                        (176,664)     (163,649)
    -------------------------------------------------------------------------
    DEFICIT, END OF YEAR                              (189,040)     (176,664)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss) per common share from:
    - continuing operations - basic and diluted         $(0.05)       $(0.09)
    - discontinued operations - basic and diluted         0.00          0.00
    -------------------------------------------------------------------------
    Net loss per common share - basic and diluted       $(0.05)       $(0.09)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Year ended    Year ended
                                                   December 31,  December 31,
    (thousands of Canadian dollars)                       2007          2006
                                                             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES - continuing operations
    Net loss                                           (12,376)      (13,195)
    Items not involving current cash flows:
      Amortization                                         869           786
      Deferred revenue recognized                       (1,278)       (1,015)
      Stock-based compensation and payments                940         1,297
      Accretion of interest on debentures                  665           569
      Impairment charges                                     -           135
      Gain on sale of assets                              (536)         (947)
      Other                                               (341)           16
    Net change in non-cash working capital balances       (211)       (1,535)
    -------------------------------------------------------------------------
    CASH USED IN OPERATING ACTIVITIES
     - continuing operations                           (12,268)      (13,889)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES - continuing operations
    Investment in term deposits with restricted use        (79)            -
    Acquisition of property, plant and equipment          (222)         (593)
    Proceeds from disposal of property,
     plant & equipment                                       -         2,758
    -------------------------------------------------------------------------
    CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
     - continuing operations                              (301)        2,165
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES - continuing operations
    Issuance of common shares and warrants,
     net of related costs                               23,854        18,581
    Issue of debentures, net of related costs                -         1,000
    Proceeds from license and supply agreements              -         3,500
    Repayment of short term loan                             -        (1,598)
    Repayments of long term debt and capital
     lease obligations                                    (675)       (1,492)
    -------------------------------------------------------------------------
    CASH PROVIDED BY FINANCING ACTIVITIES
     - continuing operations                            23,179        19,991
    -------------------------------------------------------------------------
    Cash flow provided by discontinued operations            -           175
    Effect of exchange rate changes on cash
     and cash equivalents                                  (32)           55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net increase in cash and cash equivalents
     during the year                                    10,578         8,497
    Cash and cash equivalents, beginning of year        11,213         2,716
    -------------------------------------------------------------------------
    CASH AND CASH EQUIVALENTS, END OF YEAR              21,791        11,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid                                          299           451
    -------------------------------------------------------------------------
    





For further information:

For further information: Investor Relations: Christina Bessant, Equicom
Group Inc., (416) 815-0700 x269, cbessant@equicomgroup.com

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