Nuvo Pharmaceuticals™ Announces 2016 First Quarter Results

- Revenue and gross margin increase -
- Nuvo to Host Conference Call/Audio Webcast May 12th at 8:30 a.m. ET -

MISSISSAUGA, ON, May 11, 2016 /CNW/ - Nuvo Pharmaceuticals Inc. (Nuvo or the Company) (TSX:NRI), formerly Nuvo Research Inc., a commercial healthcare company with a portfolio of commercial products and pharmaceutical manufacturing capabilities, today announced its financial and operational results for the first quarter ended March 31, 2016.  For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Condensed Consolidated Interim Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).

First Quarter and Recent Corporate Developments: 

Corporate Reorganization

  • On March 1, 2016, the Company was reorganized into two separate publicly traded companies (Reorganization).  As part of the Reorganizaton, Nuvo's development stage assets and $35.0 million of cash were transferred to Crescita Therapeutics Inc. (Crescita).  Crescita also obtained the rights to the commercial stage asset Pliaglis.  The Company retained the rights to three commercial stage assets, Pennsaid, Pennsaid 2% and the HLT Patch and the balance of its cash.  On March 7, 2016, the Company and Crescita commenced trading independently on the Toronto Stock Exchange.

Financial Highlights(1)

  • Total revenue for the first quarter of 2016 increased to $7.8 million from $7.7 million for the fourth quarter of 2015 and $4.3 million for the first quarter in 2015;

  • Product sales increased in the first quarter of 2016 to $7.3 million from $7.1 million in the fourth quarter of 2015 and $3.7 million in the first quarter of 2015;

  • Pennsaid® 2% product sales in the first quarter of 2016 increased to $7.0 million from $5.9 million in the fourth quarter of 2015 and compared to $2.2 million in the first quarter of 2015;

  • Gross margin on product sales in the first quarter of 2016 increased to $4.2 million or 57% from $4.0 million or 57% for the fourth quarter of 2015 compared to a gross margin of $1.3 million or 35% in the first quarter in 2015;

  • Net income from continuing operations for the first quarter of 2016 was $1.9 million compared $4.7 million for the fourth quarter of 2015 and $2.0 million for the first quarter of 2015; and

  • Cash and short-term investments were $14.0 million at March 31, 2016.

(1) The financial information presented herein reflects results from continuing operations with Nuvo's previously disclosed segment, Crescita, presented as a discontinued operation.

Pennsaid 2%

  • U.S. prescriptions of Pennsaid 2% decreased slightly to 109,000 in the first quarter of 2016 compared to 116,000 prescriptions in the fourth quarter of 2015 according to IMS Health. In April 2016, prescriptions increased to an average of approximately 9,700 per week compared to approximately 8,300 per week in Q1 2016;

  • In March, the Company appointed Jesse Ledger to the newly created position of Vice President, Business Development. Mr. Ledger will be responsible for all business development activities with an initial focus on maximizing the value of the Company's Pennsaid 2% franchise through global out-licensing.

  • In March, the Company announced topline results from its Pennsaid 2% trial for the treatment of ankle sprains. The trial enrolled 126 patients (the full analysis set or FAS) of which 116 patients followed the protocol (the per protocol set or PP). The trial did not meet its primary endpoint which was pain on movement (POM) at day 5 in the FAS patient group, but did meet a number of secondary endpoints including POM at day 5 in the PP patient group and POM at day 3 in both the FAS and PP patient groups. The Company has decided to repeat the trial with minor revisions to the protocol and endpoints and will release more information on timing and costing as it becomes available; and

  • In February, the Company amended its exclusive manufacturing agreement with Horizon Pharma plc (NASDAQ: HZNP) for the production of Pennsaid 2% to extend the term to December 31, 2029 from the initial term which ended on December 31, 2022. Under the terms of the agreement, the Company earns revenue from U.S. product sales of Pennsaid 2% to Horizon.

Q1 Financial Review

Table of Selected Financial Results
For further details on the results, please refer to Nuvo's Management, Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's website (www.nuvopharmaceuticals.com).


March 31,
2016

March 31,
2015

Change

(Canadian dollars in thousands,
except gross margin)

$

$

$

Product Sales

7,325

3,715

3,610

Gross Margin % on Product Sales

57%

35%

22%

Other Revenue

517

618

(101)

Operating Expenses

5,378

2,599

2,779

Net income from continuing operations

1,928

2,025

(97)

Adjusted EBITDA

2,843

1,114

1,729

 

Total revenue, consisting of product sales, royalties and research and other contract revenue for the three months ended March 31, 2016 was $7.8 million compared to $4.3 million for the three months ended March 31, 2015.  The increase in revenue primarily related to an increase in Pennsaid 2% product sales in the U.S., slightly offset by a decrease in royalty revenue.

Total operating expenses for the three months ended March 31, 2016 were $5.4 million, an increase from $2.6 million for the three months ended March 31, 2015.  The increase for the current period was primarily due to the revaluation of cash-settled stock-based compensation (SBC) costs which are primarily included in G&A costs for both years and an increase in cost of goods sold (COGS) due to increased product sales.  Included in SBC, in the current quarter, was $0.5 million related to deferred stock units (DSUs) that were settled as part of the Reorganization.

COGS for the three months ended March 31, 2016 was $3.1 million compared to $2.4 million for the three months ended March 31, 2015.  The increase in COGS in the current year was associated with increased Pennsaid 2% product sales.  The increase in product sales improved the gross margin on product sales to $4.2 million or 57% for the three months ended March 31, 2016 compared to a gross margin of $1.3 million or 35% for the three months ended March 31, 2015. 

R&D expenses were $0.2 million for the three months ended March 31, 2016 compared to $0.4 million for the three months ended March 31, 2015.  The decrease in spending in the current year related to a decrease in costs associated with the Pennsaid 2% Phase 3 trial for the treatment of ankle sprains to support regulatory approval applications for Pennsaid 2% in Canada, the E.U. and Australia. 

G&A expenses were $2.1 million for the three months ended March 31, 2016 compared to a $48,000 recovery of G&A for the three months ended March 31, 2015.  The increase in the current year primarily related to a $1.7 million increase in SBC primarily from the adjustment to market value for the outstanding DSUs prior to settlement as part of the Reorganization, and share appreciation rights (SARs) as at March 31, 2016.  The current quarter included SBC expense of $0.9 million compared to a recovery of $0.8 million in the comparative quarter.

The Company experienced a net foreign currency loss of $0.5 million for the three months ended March 31, 2016 compared to a $0.3 million gain for the three months ended March 31, 2015.

Net income from continuing operations was $1.9 million for the three months ended March 31, 2016 compared to $2.0 million for the three months ended March 31, 2015.  In the current year, the increase in gross margin and decrease in R&D expenses was offset by an increase in SBC expense due to the revaluation of SARs and DSUs to market value. 

Adjusted EBITDA increased to $2.8 million for the three months ended March 31, 2016 compared to $1.1 million for the three months ended March 31, 2015.  The increase in Adjusted EBITDA is primarily related to an increase in gross margin slightly offset by a foreign currency loss recognized in the current period compared to a foreign currency gain in the comparative period.

Cash and short-term investments was $14.0 million as at March 31, 2016 compared to $48.7 million at December 31, 2015.  The decrease in cash is related to the $35.0 million that was transferred to Crescita as part of the Reorganization of the Company and expenses related to the Reorganization.

The number of common shares outstanding as at March 31, 2016 was 11,487,184.

Non-IFRS Financial Measures

Adjusted EBITDA
EBITDA is a non-IFRS financial measure.  The term EBITDA does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies.  The Company defines Adjusted EBITDA as net income from continuing operations before net interest income, plus taxes, depreciation, amortization and SBC.  Management believes Adjusted EBITDA is a useful supplemental measure from which to determine the Company's ability to generate cash available for working capital, capital expenditures and income taxes.

The following is a summary of how EBITDA and Adjusted EBITDA are calculated:


Three Months ended

March 31, 2016

Three Months ended

March 31, 2015


$

$

Net income from continuing operations

1,928

2,025

Add back:




Interest income

(56)

(149)


Income tax expense

-

7


Depreciation and amortization

58

81

EBITDA

1,930

1,964

Add back:




SBC

913

(850)

Adjusted EBITDA

2,843

1,114

 

Management to Host Conference Call/Webcast
Management will host a conference call to discuss the results tomorrow (Thursday, May 12, 2016) at 8:30 a.m. ET.  To participate in the conference call, please dial 1 (888) 231-8191 or (647) 427-7450, reference number 95512267.  Please call in 15 minutes prior to the call to secure a line.  You will be put on hold until the conference call begins.

A taped replay of the conference call will be available two hours after the live conference call and will be accessible until May 19, 2016 by calling 1 (855) 859-2056 or (416) 849.0833, reference number 95512267.

A live audio webcast of the conference call will be available through www.nuvopharmaceuticals.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to hear the webcast.

About Nuvo Pharmaceuticals Inc.
Nuvo (TSX:NRI) is a commercial healthcare company with a portfolio of commercial products and pharmaceutical manufacturing capabilities.  Nuvo has three commercial products that are available in a number of countries; Pennsaid 2%, Pennsaid and the heated lidocaine/tetracaine patch. Pennsaid 2% is sold in the U.S. by Horizon Pharma plc (NASDAQ: HZNP) and is available for partnering in certain other territories around the world.  Nuvo manufactures Pennsaid for the global market and Pennsaid 2% for the U.S. market at its FDA, Health Canada and EU approved manufacturing facility in Varennes, Québec.  For additional information, please visit www.nuvopharmaceuticals.com.

Forward-Looking Statements
Certain statements in this press release constitute forward-looking information and/or forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws. Forward-looking statements include, but are not limited to, the future approval, marketing and sale of Pennsaid 2% in certain jurisdictions, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "believe", "should" or "plans", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include, but are not limited to, general business and economic uncertainties and adverse market conditions; as well as other risk factors included in the Company's Management Information Circular dated December 31, 2015 and the Company's Annual Information Form dated February 17, 2016 under the heading "Risks Factors", and as described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Although the forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements. The forward-looking statements contained herein are made as of the date of this press release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Nuvo Pharmaceuticals Inc.

For further information: Investor Relations, Email: ir@nuvopharm.com

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