Nuvo announces third quarter 2007 financial results



    Hires Key Pain Specialist to Lead Nuvo's Pain Product Development

    MISSISSAUGA, ON, Nov. 8 /CNW/ - Nuvo Research Inc. (TSX: NRI), a Canadian
pharmaceutical company focused on developing site-specific therapeutics that
are delivered topically using its skin-penetrating technologies, today
announced its fiscal and operational results for the third quarter ended
September 30, 2007.

    
    Highlights

    -   The Company has made substantial progress regarding studies to be
        provided to the FDA to address the conditions raised in the
        Approvable Letter of December 28, 2006. The Company believes it will
        be in a position to file a complete resubmission of its Pennsaid
        application to the FDA in early 2009 and be eligible to receive final
        marketing approval six months later.

    -   Significantly strengthened the Company's scientific team with the
        appointment of Dr. Bradley Galer to the position of Vice President.
        Dr. Galer has spent his career focused on pain management and most
        recently was the Vice President, Scientific Affairs and Senior
        Medical Officer for Endo Pharmaceuticals where he played a key role
        in the development and commercialization of the Lidoderm patch.
        Dr. Galer will be responsible for identifying, developing, and
        commercializing Nuvo topical pain products and will work closely with
        Nuvo's research and development team at its fqubed Inc. ("fqubed")
        facility in San Diego.

    -   Successfully launched Pennsaid in Greece with the Company's partner,
        Vianex, S.A. Pennsaid has already captured approximately 10% of its
        defined market in Greece.

    -   Strengthened its financial resources by completing a bought deal
        equity financing on July 13, 2007 for gross proceeds of $20 million.

    -   Closed its international marketing office and subsequent to quarter
        end reduced its Mississauga, Ontario corporate office headcount by
        approximately one-third. This restructuring will reduce overhead
        expenses and is consistent with an increasing focus on research and
        development which will include a functional transition of human
        resources from administrative, clinical and regulatory conducted at
        the corporate office to research and development activities carried
        on primarily at fqubed in San Diego. Given the importance of
        Pennsaid's FDA approval, large financial outlays that do not directly
        support the Pennsaid approval process including clinical trials for
        other pipeline products may be limited until a U.S. licensing
        transaction for Pennsaid is completed.
    

    "Our vision is to be a leading transdermal drug delivery company with a
broad portfolio of products. Our top priority continues to be the approval of
Pennsaid in the United States and signing a licensing deal for this market. We
have made substantial progress regarding studies to be provided to the FDA in
support of our application for final, unconditional Pennsaid approval," said
Henrich Guntermann, President and Chief Executive Officer. "With the support
of its five phase III clinical trials where all primary endpoints were met, we
believe that Pennsaid will be the best-in class topical NSAID in the U.S."

    
    Financial Results:

                      Three months  Three months   Nine months   Nine months
                             ended         ended         ended         ended
                      September 30, September 30, September 30, September 30,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue              $   2,558     $   1,250     $   4,971     $   3,243
    Loss from operations    (3,031)       (3,385)       (9,552)      (10,865)
    Net Loss             $  (2,523)    $  (3,385)    $  (9,044)    $ (10,053)
    -------------------------------------------------------------------------
    

    Revenues for the three-months ended September 30, 2007 doubled to
$2.6 million compared to $1.3 million for the three-months ended September 30,
2006. This increase is primarily attributable to sales of Pennsaid to our
Greek distributor which launched the product in this market in early 2007 with
full formulary coverage. Canadian sales in the quarter were consistent with
the prior year, but were a significant improvement versus the first and second
quarters of 2007. Revenue for the nine-months ended September 30, 2007
increased to $5.0 million compared to $3.2 million for the nine-months ended
September 30, 2006. This increase is primarily a result of the launch of
Pennsaid in Greece and higher sales to our Italian distributor, partially
offset by lower sales in Canada due to a spike in Canadian sales during June
2006 as our distributor, Squire Pharmaceuticals ("Squire"), introduced
Pennsaid in its new product format. This new format consisted of a 120ml twin
pack (two 60ml bottles) versus a single 60ml bottle.
    Total operating expenses for the three-month period ended September 30,
2007 increased by 10% to $4.5 million from $4.0 million for the three-month
period ended September 30, 2006. The increase in the quarter is primarily due
to higher research and development costs, offset partially by lower selling,
general and administrative costs, stock-based compensation and interest income
versus interest expense in the comparable period. For the nine-months ended
September 30, 2007, operating costs were consistent at $12.5 million as higher
research and development and selling, general and administrative costs were
offset by lower stock-based compensation and interest expense.
    Included in operating expenses are research and development ("R&D") costs
which were $2.7 million for the three-month period ended September 30, 2007,
compared with $1.8 million for the three-months ended September 30, 2006. The
significant increase in research and development costs in the quarter
primarily relates to expenditures of $1.8 million for specific studies to
address the conditions arising from the FDA Approvable Letter. The overall
increase was partially offset by lower spending on other projects versus a
year ago.
    During the first nine-months of the year the Company devoted significant
resources to understanding, clarifying and addressing the conditions raised in
the Approvable Letter of December 28, 2006. The Company has made substantial
progress regarding studies to be provided to the FDA to address these
conditions, with the exception of the longest study, a long-term dermal animal
study, that the FDA has agreed may be completed post approval, provided no
safety concerns have arisen from any of the studies prior to resubmitting the
application for Pennsaid approval. The Company has not yet started this study
as it is discussing the protocol with the FDA. The Company believes it will be
in a position to file a complete resubmission of its Pennsaid application to
the FDA in early 2009.
    The increase in research and development spending for the nine-months
ended September 30, 2007, is due expenses related to addressing the conditions
in the Approvable Letter and continued activity at fqubed, although the
strengthening Canadian dollar has muted this impact, as the Company continues
to validate, broaden and extend its multiplexed molecular penetration enhancer
(MMPE(TM)) formulations platform technology and increases new product
development activities. The MMPE(TM) technology, developed through internal
high throughput experimentation ("HTE") campaigns, uses special combinations
of molecular penetration enhancer (MPE(TM)) materials to permeabilize the skin
for enhanced delivery of a given drug. In the comparable period ending
September 30, 2006 the Company completed the analysis of the Pennsaid
Phase III efficacy and safety trial (designated 'Study 112'), the Pennsaid
Phase III long-term open-label safety trial (designated 'Study 112E') which
were a key part of the Company's September 2006 FDA submission for Pennsaid
and had commenced preparatory work for a Pennsaid Plus Phase III clinical
trial.
    The loss from operations declined by 10% to $3.0 million for the
three-months ended September 30, 2007 compared to $3.4 million for the
three-months ended September 30, 2006. The reduction in the loss was a result
of the increased margin generated from higher product sales; offset partially
by higher operating expenses. For the nine-months ended September 30, 2007,
the loss from operations decreased by 12% to $9.6 million from $10.9 million
for the nine-months ended September 30, 2006. The decrease in the year-to-date
loss was a result of the increased margin on product sales and higher
licensing fees as operating expenses were essentially unchanged.
    Cash and cash equivalents increased to $24.5 million at September 30,
2007, compared to $11.2 million at December 31, 2006 as cash provided by
financing activities of $23.2 million more than offset the $9.5 million used
by operating activities.
    Financing activities provided proceeds of $18.4 million during the third
quarter of 2007 and were generated by a bought deal equity financing that
closed on July 13, 2007 for a total of 100 million units ("Units") issued at a
price of $0.20 per Unit for gross proceeds of $20 million (the "July 2007
Bought Deal"). Each Unit consisted of one common share and one-half of a
common share purchase warrant of the Company, each whole warrant entitling the
holder thereof to acquire one common share at a price of $0.30 per share until
July 13, 2009. Net cash proceeds were $18.5 million, after deducting the
underwriters' fee of 6% and the expenses of the offering. As part of the
transaction the Underwriters will receive 5 million warrants (the "Underwriter
Warrants") for services provided in conjunction with the July 2007 Bought
Deal. The Underwriter Warrants are each exercisable into one Unit at a price
of $0.20 per Unit for a period of 24 months following the Closing Date. The
July 2007 Bought Deal provided $18.5 million of net proceeds that were
partially offset by $0.1 million of scheduled debt repayments.
    Net cash provided by financing activities for the nine-month period ended
September 30, 2007 totaled $23.2 million and consisted primarily of
$18.5 million in proceeds from the July 2007 Bought Deal discussed above and
$5.3 million in proceeds from the exercise of warrants offset by debt
repayments. In the comparable nine-month period ended September 30, 2006 net
cash provided by financing activities totaled $16.8 million as the Company
completed a bought deal financing consisting of 37.5 million units ("Units")
issued at a price of $0.40 per Unit for gross proceeds of $15.0 million. The
Company also sold additional Pennsaid licensing rights in Canada for proceeds
of $3.75 million and generated $2.0 million through the exercise of warrants,
stock options and employee contributions to the Share Purchase Plan. These
proceeds were somewhat offset by a $1.6 million payment into escrow to
discharge the mortgage on the Company's former head office and $1.1 million in
scheduled debt repayments.
    Detailed financial statements and the MD&A are available at
www.nuvoresearch.com or www.sedar.com.

    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 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
drug (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, 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:

    
                             NUVO RESEARCH INC.
                         CONSOLIDATED BALANCE SHEETS

                                                         As at         As at
                                                  September 30,  December 31,
                                                          2007          2006
    (thousands of Canadian dollars)                  Unaudited       Audited
                                                             $             $
    -------------------------------------------------------------------------
    ASSETS
    CURRENT
    Cash and cash equivalents                           24,545        11,213
    Accounts receivable                                  1,727           968
    Other receivables                                      954           375
    Inventories                                          1,025         1,051
    Prepaid expenses and other                             706           892
    -------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                                28,957        14,499

    Property, plant and equipment                        2,684         3,120
    -------------------------------------------------------------------------
    TOTAL ASSETS                                        31,641        17,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT
    Accounts payable and accrued liabilities             2,864         3,008
    Short term loan                                        560           557
    Deferred revenue                                     1,240         1,352
    Current portion of long term debt and
     capital lease obligations                              92           677
    -------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                            4,756         5,594
    Deferred revenue                                     5,669         6,552
    Long term debt and capital lease obligations           226           337
    Debentures                                           2,317         1,999
    -------------------------------------------------------------------------
    TOTAL LIABILITIES                                   12,968        14,482
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Common shares                                      187,543       165,400
    Warrants                                            11,243         9,402
    Contributed surplus                                  5,481         4,885
    Accumulated other comprehensive income                 114           114
    Deficit                                           (185,708)     (176,664)
    -------------------------------------------------------------------------
    TOTAL SHAREHOLDERS' EQUITY                          18,673         3,137
    -------------------------------------------------------------------------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          31,641        17,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                             NUVO RESEARCH INC.
                 CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

    Unaudited                 Three-months                Nine-months
    (thousands of                ended                       ended
    Canadian dollars  September 30, September 30, September 30, September 30,
    except per share          2007          2006          2007          2006
    amounts)                     $             $             $             $
    -------------------------------------------------------------------------
    REVENUE
    Product and research
     contract revenue        2,308         1,000         4,221         2,705
    Licensing fees             250           250           750           538
    -------------------------------------------------------------------------
                             2,558         1,250         4,971         3,243
    -------------------------------------------------------------------------
    EXPENSES
    Cost of goods sold       1,122           589         2,070         1,619
    Research and
     development             2,734         1,768         6,156         5,408
    Selling, general
     and administrative
     expenses                1,481         1,627         5,029         4,779
    Stock-based
     compensation               94           207           468           914
    Amortization of
     property, plant,
     and equipment             230           198           656           571
    Foreign currency
     (gain) loss               (39)           21          (120)          (15)
    Interest, net              (33)          225           264           832
    -------------------------------------------------------------------------
                             5,589         4,635        14,523        14,108
    -------------------------------------------------------------------------
    LOSS FROM OPERATIONS    (3,031)       (3,385)       (9,552)      (10,865)
    Gain on sale of assets     508             -           508           947
    Impairment charge            -             -             -          (135)
    -------------------------------------------------------------------------
    LOSS FROM CONTINUING
     OPERATIONS             (2,523)       (3,385)       (9,044)      (10,053)
    -------------------------------------------------------------------------
    NET INCOME FROM
     DISCONTINUED
     OPERATIONS                  -             -             -            50
    -------------------------------------------------------------------------
    NET LOSS FOR THE
     PERIOD AND TOTAL
     COMPREHENSIVE LOSS     (2,523)       (3,385)       (9,044)      (10,003)

    Deficit, beginning
     of period            (183,185)     (170,267)     (176,664)     (163,649)
    -------------------------------------------------------------------------
    DEFICIT,
     END OF PERIOD        (185,708)     (173,652)     (185,708)     (173,652)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net loss per common
     share - basic and
     diluted                 (0.01)        (0.02)        (0.04)        (0.07)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                             NUVO RESEARCH INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Three-months                Nine-months
    Unaudited                    ended                       ended
    (thousands of     September 30, September 30, September 30, September 30,
    Canadian dollars)         2007          2006          2007          2006
                                 $             $             $             $
    -------------------------------------------------------------------------
    OPERATING
     ACTIVITIES
     - continuing
     operations
    Net loss from
     continuing
     operations             (2,523)       (3,385)       (9,044)      (10,053)
    Items not involving
     current cash flows:
      Amortization             230           198           656           571
      Deferred revenue
       recognized             (448)         (250)       (1,031)         (774)
      Stock-based
       compensation
       and payments             94           207           600           914
      Impairment charge          -             -             -           135
      Accretion of
       interest on
       debentures              173           151           476           420
      Gain on sale of
       assets                 (508)            -          (508)         (947)
      Other                      -             -           (69)            -
    Net change in
     non-cash working
     capital balances          (71)         (911)         (598)         (781)
    -------------------------------------------------------------------------
    CASH USED IN
     OPERATING ACTIVITIES
     - continuing
     operations             (3,053)       (3,990)       (9,518)      (10,515)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
     - continuing
     operations
    Acquisition of
     property, plant and
     equipment                 (31)         (152)         (220)         (535)
    Proceeds from sale
     of assets                   -             -             -         2,744
    -------------------------------------------------------------------------
    CASH PROVIDED BY
     (USED IN) INVESTING
     ACTIVITIES -
     continuing
     operations                (31)         (152)         (220)        2,209
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
     - continuing
     operations
    Issuance of common
     shares, net of
     related costs          18,493            (3)       23,823        15,687
    Issue of debenture           -             -             -           500
    Proceeds from license
     and supply agreements
     and advances on
     research contracts         40             -            40         3,250
    Repayment of short
     term loan                   -             -             -        (1,598)
    Repayments of long
     term debt and capital
     lease obligations        (113)         (329)         (668)       (1,075)
    -------------------------------------------------------------------------
    CASH PROVIDED BY
     (USED IN) FINANCING
     ACTIVITIES -
     continuing operations  18,420          (332)       23,195        16,764
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents      (49)           (2)         (125)           (4)
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     from continuing
     operations             15,287        (4,476)       13,332         8,454
    Cash flow from
     discontinued
     operations                  -            50             -            50
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the period      15,287        (4,426)       13,332         8,504
    Cash and cash
     equivalents,
     beginning of period     9,258        15,646        11,213         2,716
    -------------------------------------------------------------------------
    CASH AND CASH
     EQUIVALENTS,
     END OF PERIOD          24,545        11,220        24,545        11,220
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid               24            59           188           261
    -------------------------------------------------------------------------
    

    %SEDAR: 00002418E




For further information:

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

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