Nuvo announces 2008 fourth quarter and year-end financial results



    MISSISSAUGA, ON, Feb. 27 /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,
2008.

    
    Key Corporate Developments:

    -   Presented positive Phase 3 study results for Pennsaid in a poster
        presentation at the 2008 American College of Rheumatology Scientific
        Meeting in San Francisco

    -   Initiated a warrant incentive program that has the potential to
        generate up to $9 million for the Company

    -   Successfully completed all Pennsaid(R) studies necessary to resubmit
        the application for Pennsaid approval to the United States Food and
        Drug Administration (FDA). The FDA confirmed that it has accepted
        this filing as a complete response to its Approvable Letter for
        Pennsaid dated December 28, 2006 and provided the Company with a date
        of August 5, 2009 (the "PDUFA Date") pursuant to the Prescription
        Drug User Fee Act by which the FDA intends to advise Nuvo on
        Pennsaid's approvability

    -   Announced that the Company's High Throughput Experimentation Platform
        was selected as a 2009 Edison Award Finalist

    "We are highly optimistic about Pennsaid's potential for approval and are
continuing discussions with potential United States licensing partners," said
Henrich Guntermann, President and Chief Executive Officer of Nuvo Research.


    Financial Results:

    (thousands of Canadian dollars)

                      Three months  Three months
                             ended         ended    Year ended    Year ended
                       December 31,  December 31,  December 31,  December 31,
                              2008          2007          2008          2007
    -------------------------------------------------------------------------
    Revenue               $  3,117      $  2,207      $ 10,727      $  7,178
    Net loss              $ (2,413)     $ (3,332)     $(10,552)     $(12,376)
    -------------------------------------------------------------------------
    

    Revenue, consisting of product sales, license fee revenue, and research
and other contract revenue, for the three-months ended December 31, 2008
increased 41% to $3.1 million compared with $2.2 million for the three-months
ended December 31, 2007. The increase was attributable to many factors
including a $0.5 million increase in product sales of both Pennsaid and WF10
based products, the recognition of additional licensing fee revenue and
research revenue earned on a collaboration agreement with a Fortune Global 500
company that develops and markets skin care products. For the year, revenue
increased 49% to $10.7 million versus $7.2 million. This is primarily due to
higher Pennsaid product sales in Greece where 2008 was the first full year of
selling the product in this market after its launch during the second quarter
of 2007 and an increase of $1.2 million in licensing fee revenue.
    Gross margin on product sales was $1.0 million for the three-months ended
December 31, 2008 compared to $0.6 million for the comparable quarter in 2007.
The increase in gross margin is primarily attributable to a 22% increase in
Pennsaid product sales to new quarterly high. For the year, gross margin
increased to $3.2 million compared to $1.5 million for the year ending
December 31, 2007. The increase in gross margin is primarily attributable to
the 37% increase in Pennsaid sales, the 24% increase in WF10 based product
sales and significant improvements and efficiencies achieved in the Pennsaid
manufacturing process, partially offset by price increases in the raw
materials used to compound and package Pennsaid and the strengthening US
dollar. The overall gross margin percentage was 40% in 2008 versus 26% in
2007.
    Total operating expenses for the three-month period ended December 31,
2008 increased to $4.9 million versus $4.2 million for the three-months ended
December 31, 2007. The $0.7 million increase in operating expenses is due to
higher research and development expenses, the $0.2 million impairment charge
recorded against certain of the Company's intangible assets and increases in
selling, general and administrative costs and net interest expense, partially
offset by $0.1 million foreign exchange gain in 2008. Total operating expenses
for year ended December 31, 2008 were $17.0 million, an increase of 8%
compared to $15.7 million for the year ended December 31, 2007. The increase
from 2007 relates to an increase in net interest expense and higher research
and development spending, offset partially by lower SG&A costs. This
highlights the impact of the Company's efforts during the third and fourth
quarters of 2007 to focus its resources on research activities rather than
administrative costs.
    Research and development expenses increased by 17% to $2.5 million for
the three months ended December 31, 2008 compared to $2.1 million for the
three months ended December 31, 2007. For the year ended December 31, 2008,
research and development costs increased 11% to $9.3 million compared to $8.3
million for the year ended December 31, 2007. The majority of the spending in
the fourth quarter and the year related to the completion of the Short and
Long-Term Studies required to address the conditions raised in the Approvable
Letter, costs associated with the Phase 2 trial of WF10 as an adjuvant therapy
for pancreatic cancer, the preclinical development of the Company's pipeline
candidates and costs relating to expanding the Company's research capabilities
in San Diego and a pain advisory conference hosted by the Company.
    SG&A expenses increased by 9% to $1.6 million for the three months ended
December 31, 2008 compared to $1.5 million for the three months ended December
31, 2007. During the quarter, the impact of lower ongoing personnel costs and
the savings associated with closing the Company's international marketing
office in Barbados were more than offset by increased spending on business
development activities as the Company expanded efforts to sign a U.S. licensee
for Pennsaid and higher professional fees related to the Squire Tax
Reassessment. For the year ended December 31, 2008, SG&A costs decreased 5% to
$5.2 million compared to $5.5 million for the year ended December 31, 2007.
The decrease is primarily attributable to activities undertaken during the
third and fourth quarters of 2007, including the closure of the Company's
international marketing office in Barbados and staff reductions at the
corporate head office, offset partially by additional severance costs incurred
as the Company continued to strengthen its team, increased spending on
business development activities, incurred higher professional fees and the
costs related to the Squire Tax Reassessment.
    For the three months ended December 31, 2008, the net loss decreased to
$2.4 million from $3.3 million for the three months ended December 31, 2007.
Included in the results for the quarter is a non-cash gain of $0.9 million
from the change in the estimate of the amount of the liability related to the
loans from Leadenhall. Excluding the impact of this item, the net loss would
have declined slightly to $3.3 million in the current quarter compared to $3.4
million a year ago. For the year ended December 31, 2008, the net loss
declined by 15% to $10.6 million from $12.4 million for the year ended
December 31, 2007.
    Cash and cash equivalents on hand at December 31, 2008 of $15.2 million
were $3.7 million less than the $18.9 million at September 30, 2008. The
decrease is almost entirely attributable to cash used by operating activities.
    Cash used in operating activities of $4.2 million was higher than the
$2.7 million used in the three-month comparative period ended December 31,
2007 due primarily to a higher investment in non-cash working capital during
the fourth quarter of 2008. The significant investment in non-cash working
capital relates primarily to the significant increase in accounts receivable
attributable to the achieving record quarterly sales of Pennsaid to Europe
during the fourth quarter of 2008. For the year ended December 31, 2008 funds
used in operating activities decreased to $9.1 million from $12.3 million.
    Detailed financial statements and the MD&A are available at
www.nuvoresearch.com or www.sedar.com.

    Notice of Annual and Special Meeting

    Nuvo will be holding its Annual and Special Meeting of Shareholders on
Thursday, April 30, 2009 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 is a topical non-steroidal anti-inflammatory drug used for the
treatment of osteoarthritis. Pennsaid allows the active ingredient,
diclofenac, 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 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 27 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.

    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. Nuvo's lead product is Pennsaid, a topical
non-steroidal anti-inflammatory drug used for the treatment of osteoarthritis.
Nuvo intends to leverage its skin-penetrating technologies to create a
portfolio of topical and 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, 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, 2007. 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:


    
                         CONSOLIDATED BALANCE SHEETS

                                                         As at         As at
                                                   December 31,  December 31,
    (thousands of Canadian dollars)                       2008          2007
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    CURRENT
    Cash and cash equivalents                           15,219        21,791
    Accounts receivable                                  2,294         1,802
    Other receivable                                         -           579
    Inventories                                          1,393         1,042
    Prepaid expenses and other                             446           789
    -------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                                19,352        26,003

    Restricted cash                                         93            79
    Property, plant and equipment                        1,990         2,475
    Intangible assets                                        -            90
    -------------------------------------------------------------------------
    TOTAL ASSETS                                        21,435        28,647
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT
    Accounts payable and accrued liabilities             2,736         2,994
    Short-term loan                                          -           587
    Deferred revenue                                     2,241         1,211
    Current portion of long-term debt
     and capital lease obligations                         181            94
    Current portion of debentures                            -           500
    -------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                            5,158         5,386
    Deferred revenue                                     3,321         5,169
    Long-term debt and capital lease obligations           320           222
    Debentures                                           4,774         2,006
    -------------------------------------------------------------------------
    TOTAL LIABILITIES                                   13,573        12,783
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Common shares                                      189,603       187,877
    Warrants                                            10,847        11,243
    Contributed surplus                                  6,890         5,670
    Accumulated other comprehensive income                 114           114
    Deficit                                           (199,592)     (189,040)
    -------------------------------------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                           7,862        15,864
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          21,435        28,647
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



       CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT

                                                    Year ended    Year ended
                                                   December 31,  December 31,
    (thousands of Canadian dollars                        2008          2007
     except per share and share amounts)                     $             $
    -------------------------------------------------------------------------
    REVENUE

    Product sales                                        8,008         5,933
    Cost of goods sold                                   4,809         4,391
    -------------------------------------------------------------------------
    Gross margin on product sales                        3,199         1,542

    Other revenue

    Licensing fees                                       2,514         1,000
    Research and other contract revenue                    205           245
    -------------------------------------------------------------------------
                                                         5,918         2,787
    EXPENSES

    Research and development                             9,263         8,319
    Selling, general and administrative expenses         5,204         5,498
    Stock-based compensation                               803           808
    Amortization of property, plant, and equipment
     and intangibles and impairment of intangibles)      1,068           869
    Foreign currency gain                                  (93)         (118)
    Interest expense                                     1,283         1,102
    Interest income                                       (497)         (779)
    -------------------------------------------------------------------------
                                                        17,031        15,699
    -------------------------------------------------------------------------
    Loss from operations                               (11,113)      (12,912)

    Change in estimate in contingency                      860             -
    Loss on extinguishment of convertible debenture       (299)            -
    Gain on sale of assets                                   -           536
    -------------------------------------------------------------------------
    NET LOSS AND TOTAL COMPREHENSIVE LOSS              (10,552)      (12,376)

    Deficit, beginning of year                        (189,040)     (176,664)
    -------------------------------------------------------------------------
    DEFICIT, END OF YEAR                              (199,592)     (189,040)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net loss per common share - basic and diluted       $(0.04)       $(0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of common shares outstanding -
     basic and diluted (millions)                        306.3         243.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Year ended    Year ended
                                                   December 31,  December 31,
    (thousands of Canadian dollars)                       2008          2007
                                                             $             $
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES

    Net loss                                           (10,552)      (12,376)
    Items not involving current cash flows:
      Amortization and impairment charge                 1,068           869
      Deferred revenue recognized                       (1,832)       (1,285)
      Stock-based compensation and payments                815           940
      Accretion of interest on debentures                  828           665
      Loss on extinguishment of convertible debenture      299             -
      Change in estimate in contingency                   (860)            -
      Gain on sale of assets                                 -          (536)
      Other                                                (44)         (345)

    Net change in non-cash working capital                 149          (211)
    Proceeds from licensing arrangements
     and advances on research contracts                  1,014            11
    -------------------------------------------------------------------------
    CASH USED IN OPERATING ACTIVITIES                   (9,115)      (12,268)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES

    Investment in term deposits with restricted use          -           (79)
    Acquisition of property, plant and equipment          (151)         (222)
    Proceeds from the sale of assets                        28             -
    -------------------------------------------------------------------------
    CASH USED IN INVESTING ACTIVITIES                     (123)         (301)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES

    Issuance of common shares and warrants,
     net of related costs                                1,115        23,854
    Issue of debentures, net of related costs            1,956             -
    Costs related to the November 2004 Unsecured
     Convertible Debenture amendments                      (32)            -
    Repayments of debentures, long-term
     debt and capital lease obligations                   (630)         (675)
    -------------------------------------------------------------------------
    CASH PROVIDED BY FINANCING ACTIVITIES                2,409        23,179
    -------------------------------------------------------------------------
    Effect of exchange rate changes
     on cash and cash equivalents                          257           (32)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net increase (decrease) in cash and
     cash equivalents during the year                   (6,572)       10,578
    Cash and cash equivalents, beginning of year        21,791        11,213
    -------------------------------------------------------------------------
    CASH AND CASH EQUIVALENTS, END OF YEAR              15,219        21,791
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid                                          256           299
    -------------------------------------------------------------------------
    





For further information:

For further information: about Nuvo, please contact: Media and Investor
Relations, Adam Peeler, The Equicom Group Inc., Tel: (416) 815-0700 x225,
email: apeeler@equicomgroup.com

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